Correlation Between Toronto Dominion and KeyCorp

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

Diversification Opportunities for Toronto Dominion and KeyCorp

-0.65

Correlation Coefficient

Toronto Dominion  KeyCorp

Excellent diversification

The 3 months correlation between Toronto and KeyCorp is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and KeyCorp go up and down completely randomly.

Pair Corralation between Toronto Dominion and KeyCorp

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to under-perform the KeyCorp. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 2.09 times less risky than KeyCorp. The stock trades about -0.05 of its potential returns per unit of risk. The KeyCorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,646  in KeyCorp on September 4, 2024 and sell it today you would earn a total of  265.00  from holding KeyCorp or generate 16.1% 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.  KeyCorp

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KeyCorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, KeyCorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and KeyCorp

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

The idea behind Toronto Dominion Bank and KeyCorp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.