Correlation Between GM and TD Active
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and TD Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and TD Active Global, you can compare the effects of market volatilities on GM 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 GM with a short position of TD Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TD Active.
Diversification Opportunities for GM and TD Active
Very good diversification
The 3 months correlation between GM and TGFI is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and TD Active go up and down completely randomly.
Pair Corralation between GM and TD Active
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.6 times more return on investment than TD Active. However, GM is 4.6 times more volatile than TD Active Global. It trades about 0.06 of its potential returns per unit of risk. TD Active Global is currently generating about 0.06 per unit of risk. If you would invest 3,263 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,997 from holding General Motors or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
General Motors vs. TD Active Global
Performance |
| Timeline |
| General Motors |
| TD Active Global |
GM and TD Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and TD Active
The main advantage of trading using opposite GM and TD Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and TD Active Global 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.| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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