Correlation Between Toronto Dominion and NIKE
Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and NIKE 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 NIKE 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 NIKE Inc CDR, you can compare the effects of market volatilities on Toronto Dominion and NIKE 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 NIKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and NIKE.
Diversification Opportunities for Toronto Dominion and NIKE
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toronto and NIKE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and NIKE Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc CDR 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 NIKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKE Inc CDR has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and NIKE go up and down completely randomly.
Pair Corralation between Toronto Dominion and NIKE
Assuming the 90 days horizon Toronto Dominion Bank is expected to generate 0.88 times more return on investment than NIKE. However, Toronto Dominion Bank is 1.14 times less risky than NIKE. It trades about -0.11 of its potential returns per unit of risk. NIKE Inc CDR is currently generating about -0.13 per unit of risk. If you would invest 8,383 in Toronto Dominion Bank on September 25, 2024 and sell it today you would lose (822.00) from holding Toronto Dominion Bank or give up 9.81% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Toronto Dominion Bank vs. NIKE Inc CDR
Performance |
Timeline |
Toronto Dominion Bank |
NIKE Inc CDR |
Toronto Dominion and NIKE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Toronto Dominion and NIKE
The main advantage of trading using opposite Toronto Dominion and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, NIKE 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 NIKE will offset losses from the drop in NIKE's long position.Toronto Dominion vs. Bank of Montreal | Toronto Dominion vs. Bank of Nova | Toronto Dominion vs. Royal Bank of | Toronto Dominion vs. National Bank of |
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Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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