Correlation Between TD Canadian and TD Select
Can any of the company-specific risk be diversified away by investing in both TD Canadian and TD Select 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 TD Canadian and TD Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Canadian Aggregate and TD Select Short, you can compare the effects of market volatilities on TD Canadian and TD Select 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 TD Canadian with a short position of TD Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and TD Select.
Diversification Opportunities for TD Canadian and TD Select
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TDB and TCSB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Aggregate and TD Select Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Select Short and TD Canadian 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 TD Canadian Aggregate are associated (or correlated) with TD Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Select Short has no effect on the direction of TD Canadian i.e., TD Canadian and TD Select go up and down completely randomly.
Pair Corralation between TD Canadian and TD Select
Assuming the 90 days trading horizon TD Canadian Aggregate is expected to generate 2.22 times more return on investment than TD Select. However, TD Canadian is 2.22 times more volatile than TD Select Short. It trades about 0.09 of its potential returns per unit of risk. TD Select Short is currently generating about 0.2 per unit of risk. If you would invest 1,180 in TD Canadian Aggregate on September 12, 2024 and sell it today you would earn a total of 147.00 from holding TD Canadian Aggregate or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Canadian Aggregate vs. TD Select Short
Performance |
| Timeline |
| TD Canadian Aggregate |
| TD Select Short |
TD Canadian and TD Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Canadian and TD Select
The main advantage of trading using opposite TD Canadian and TD Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian position performs unexpectedly, TD Select 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 Select will offset losses from the drop in TD Select's long position.| TD Canadian vs. TD International Equity | TD Canadian vs. TD Canadian Equity | TD Canadian vs. TD Equity Index | TD Canadian vs. TD Equity CAD |
| TD Select vs. TD Active Preferred | TD Select vs. TD Canadian Aggregate | TD Select vs. TD Select Short | TD Select vs. TD Active Global |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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