Correlation Between Toronto Dominion and Information Services

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

Diversification Opportunities for Toronto Dominion and Information Services

0.96

Correlation Coefficient

Toronto Dominion  Information Services

Almost no diversification

The 3 months correlation between Toronto and Information is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Toronto Dominion i.e., Toronto Dominion and Information Services go up and down completely randomly.

Pair Corralation between Toronto Dominion and Information Services

Assuming the 90 days horizon Toronto Dominion is expected to generate 1.06 times less return on investment than Information Services. But when comparing it to its historical volatility, Toronto Dominion Bank is 2.14 times less risky than Information Services. It trades about 0.4 of its potential returns per unit of risk. Information Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,705  in Information Services on May 1, 2025 and sell it today you would earn a total of  495.00  from holding Information Services or generate 18.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Toronto Dominion Bank  vs.  Information Services

Toronto Dominion Bank

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Toronto Dominion Bank are ranked lower than 31 (%) 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.

Information Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Information Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toronto Dominion and Information Services

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

The idea behind Toronto Dominion Bank and Information Services 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.