Correlation Between MidCap Financial and Toronto Dominion

Can any of the company-specific risk be diversified away by investing in both MidCap Financial and Toronto Dominion 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 MidCap Financial and Toronto Dominion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MidCap Financial Investment and The Toronto Dominion Bank, you can compare the effects of market volatilities on MidCap Financial and Toronto Dominion 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 MidCap Financial with a short position of Toronto Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Toronto Dominion.

Diversification Opportunities for MidCap Financial and Toronto Dominion

0.66

Correlation Coefficient

MidCap Financial  Toronto Dominion

Poor diversification

The 3 months correlation between MidCap and Toronto is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and The Toronto Dominion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toronto Dominion and MidCap Financial 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 MidCap Financial Investment are associated (or correlated) with Toronto Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toronto Dominion has no effect on the direction of MidCap Financial i.e., MidCap Financial and Toronto Dominion go up and down completely randomly.

Pair Corralation between MidCap Financial and Toronto Dominion

Assuming the 90 days trading horizon MidCap Financial is expected to generate 1.37 times less return on investment than Toronto Dominion. In addition to that, MidCap Financial is 1.59 times more volatile than The Toronto Dominion Bank. It trades about 0.13 of its total potential returns per unit of risk. The Toronto Dominion Bank is currently generating about 0.29 per unit of volatility. If you would invest  5,417  in The Toronto Dominion Bank on April 23, 2025 and sell it today you would earn a total of  935.00  from holding The Toronto Dominion Bank or generate 17.26% return on investment over 90 days.

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

MidCap Financial Investment  vs.  The Toronto Dominion Bank

MidCap Financial Inv

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Toronto Dominion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Toronto Dominion Bank are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Toronto Dominion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MidCap Financial and Toronto Dominion

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

The idea behind MidCap Financial Investment and The Toronto Dominion Bank 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.