Correlation Between Toronto Dominion and ING Group

Can any of the company-specific risk be diversified away by investing in both Toronto Dominion and ING Group 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 ING Group 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 ING Group NV, you can compare the effects of market volatilities on Toronto Dominion and ING Group 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 ING Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toronto Dominion and ING Group.

Diversification Opportunities for Toronto Dominion and ING Group

0.75

Correlation Coefficient

Toronto Dominion  ING Group

Poor diversification

The 3 months correlation between Toronto and ING is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and ING Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING Group NV 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 ING Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING Group NV has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and ING Group go up and down completely randomly.

Pair Corralation between Toronto Dominion and ING Group

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to generate 0.92 times more return on investment than ING Group. However, Toronto Dominion Bank is 1.09 times less risky than ING Group. It trades about -0.04 of its potential returns per unit of risk. ING Group NV is currently generating about -0.17 per unit of risk. If you would invest  5,846  in Toronto Dominion Bank on September 2, 2024 and sell it today you would lose (193.00) from holding Toronto Dominion Bank or give up 3.3% 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.  ING Group NV

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 rather sound fundamental indicators, Toronto Dominion is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ING Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Toronto Dominion and ING Group

The main advantage of trading using opposite Toronto Dominion and ING Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion position performs unexpectedly, ING Group 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 ING Group will offset losses from the drop in ING Group's long position.

The idea behind Toronto Dominion Bank and ING Group NV 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.