Correlation Between Toronto Dominion and WonderFi Technologies

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

Diversification Opportunities for Toronto Dominion and WonderFi Technologies

-0.65

Correlation Coefficient

Toronto Dominion  WonderFi Technologies

Excellent diversification

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

Pair Corralation between Toronto Dominion and WonderFi Technologies

Assuming the 90 days horizon Toronto Dominion is expected to generate 2.6 times less return on investment than WonderFi Technologies. But when comparing it to its historical volatility, Toronto Dominion Bank is 5.5 times less risky than WonderFi Technologies. It trades about 0.04 of its potential returns per unit of risk. WonderFi Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  18.00  in WonderFi Technologies on June 20, 2024 and sell it today you would lose (2.00) from holding WonderFi Technologies or give up 11.11% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  WonderFi Technologies

Toronto Dominion Bank

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Toronto Dominion displayed solid returns over the last few months and may actually be approaching a breakup point.

WonderFi Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WonderFi Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Toronto Dominion and WonderFi Technologies

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

The idea behind Toronto Dominion Bank and WonderFi Technologies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.