Correlation Between TD Active and TD Equity
Can any of the company-specific risk be diversified away by investing in both TD Active and TD Equity 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 Active and TD Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Active Global and TD Equity Index, you can compare the effects of market volatilities on TD Active and TD Equity 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 Active with a short position of TD Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Active and TD Equity.
Diversification Opportunities for TD Active and TD Equity
Almost no diversification
The 3 months correlation between TGED and TPU is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding TD Active Global and TD Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Equity Index and TD Active 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 Active Global are associated (or correlated) with TD Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Equity Index has no effect on the direction of TD Active i.e., TD Active and TD Equity go up and down completely randomly.
Pair Corralation between TD Active and TD Equity
Assuming the 90 days trading horizon TD Active Global is expected to generate 1.18 times more return on investment than TD Equity. However, TD Active is 1.18 times more volatile than TD Equity Index. It trades about -0.04 of its potential returns per unit of risk. TD Equity Index is currently generating about -0.09 per unit of risk. If you would invest 2,748 in TD Active Global on November 27, 2024 and sell it today you would lose (19.00) from holding TD Active Global or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Active Global vs. TD Equity Index
Performance |
| Timeline |
| TD Active Global |
| TD Equity Index |
TD Active and TD Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Active and TD Equity
The main advantage of trading using opposite TD Active and TD Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Active position performs unexpectedly, TD Equity 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 Equity will offset losses from the drop in TD Equity's long position.| TD Active vs. TD Active Enhanced | TD Active vs. TD Q Canadian | TD Active vs. TD Q Global | TD Active vs. TD Canadian Equity |
| TD Equity vs. TD Canadian Equity | TD Equity vs. TD International Equity | TD Equity vs. TD Equity CAD | TD Equity vs. TD Canadian Aggregate |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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