Correlation Between TD Active and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both TD Active and Vanguard FTSE 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 Vanguard FTSE 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 Vanguard FTSE Canada, you can compare the effects of market volatilities on TD Active and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Active and Vanguard FTSE.
Diversification Opportunities for TD Active and Vanguard FTSE
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TGGR and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding TD Active Global and Vanguard FTSE Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canada 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canada has no effect on the direction of TD Active i.e., TD Active and Vanguard FTSE go up and down completely randomly.
Pair Corralation between TD Active and Vanguard FTSE
Assuming the 90 days trading horizon TD Active is expected to generate 1.12 times less return on investment than Vanguard FTSE. In addition to that, TD Active is 1.25 times more volatile than Vanguard FTSE Canada. It trades about 0.11 of its total potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.16 per unit of volatility. If you would invest 4,167 in Vanguard FTSE Canada on August 25, 2024 and sell it today you would earn a total of 1,049 from holding Vanguard FTSE Canada or generate 25.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Active Global vs. Vanguard FTSE Canada
Performance |
| Timeline |
| TD Active Global |
| Vanguard FTSE Canada |
TD Active and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Active and Vanguard FTSE
The main advantage of trading using opposite TD Active and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Active position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| TD Active vs. Vanguard FTSE Canada | TD Active vs. Vanguard Canadian Aggregate | TD Active vs. Vanguard Total Market | TD Active vs. Vanguard FTSE Emerging |
| Vanguard FTSE vs. iShares Core MSCI | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. iShares Core SP | Vanguard FTSE vs. Vanguard 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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