Correlation Between First Trust and TD Active
Can any of the company-specific risk be diversified away by investing in both First Trust and TD Active 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 First Trust and TD Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and TD Active Global, you can compare the effects of market volatilities on First Trust and TD Active 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 First Trust with a short position of TD Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and TD Active.
Diversification Opportunities for First Trust and TD Active
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and TGFI is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and TD Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Global and First Trust 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 First Trust Indxx are associated (or correlated) with TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Global has no effect on the direction of First Trust i.e., First Trust and TD Active go up and down completely randomly.
Pair Corralation between First Trust and TD Active
Assuming the 90 days trading horizon First Trust Indxx is expected to under-perform the TD Active. In addition to that, First Trust is 1.87 times more volatile than TD Active Global. It trades about -0.12 of its total potential returns per unit of risk. TD Active Global is currently generating about 0.11 per unit of volatility. If you would invest 2,012 in TD Active Global on October 24, 2024 and sell it today you would earn a total of 15.00 from holding TD Active Global or generate 0.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
First Trust Indxx vs. TD Active Global
Performance |
| Timeline |
| First Trust Indxx |
| TD Active Global |
First Trust and TD Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and TD Active
The main advantage of trading using opposite First Trust and TD Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, TD Active 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 TD Active will offset losses from the drop in TD Active's long position.| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
| TD Active vs. TD Active High | TD Active vs. TD Q Global | TD Active vs. TD Active Global | TD Active vs. TD Q Canadian |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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