Correlation Between Toronto Dominion and Mullen

Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and Mullen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Toronto Dominion and Mullen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Toronto Dominion Bank and Mullen Group, you can compare the effects of market volatilities on Toronto Dominion and Mullen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Toronto Dominion with a short position of Mullen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and Mullen.

Diversification Opportunities for Toronto Dominion and Mullen

-0.64

Correlation Coefficient

Toronto Dominion  Mullen

Excellent diversification

The 3 months correlation between Toronto and Mullen is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Mullen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Group and Toronto Dominion is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Toronto Dominion Bank are associated (or correlated) with Mullen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Group has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Mullen go up and down completely randomly.

Pair Corralation between Toronto Dominion and Mullen

Assuming the 90 days horizon Toronto Dominion is expected to generate 110.17 times less return on investment than Mullen. But when comparing it to its historical volatility, Toronto Dominion Bank is 1.33 times less risky than Mullen. It trades about 0.0 of its potential returns per unit of risk. Mullen Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,394  in Mullen Group on September 3, 2024 and sell it today you would earn a total of  177.00  from holding Mullen Group or generate 12.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Toronto Dominion Bank  vs.  Mullen Group

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Toronto Dominion is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mullen Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mullen Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Mullen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toronto Dominion and Mullen

The main advantage of trading using opposite Toronto Dominion and Mullen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, Mullen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mullen will offset losses from the drop in Mullen's long position.

The idea behind Toronto Dominion Bank and Mullen Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.