Correlation Between TD International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both TD International and Dow Jones 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 International and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD International Equity and Dow Jones Industrial, you can compare the effects of market volatilities on TD International and Dow Jones 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 International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD International and Dow Jones.
Diversification Opportunities for TD International and Dow Jones
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between THE and Dow is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding TD International Equity and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and TD International 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 International Equity are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of TD International i.e., TD International and Dow Jones go up and down completely randomly.
Pair Corralation between TD International and Dow Jones
Assuming the 90 days trading horizon TD International Equity is expected to generate 0.74 times more return on investment than Dow Jones. However, TD International Equity is 1.36 times less risky than Dow Jones. It trades about -0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.09 per unit of risk. If you would invest 2,535 in TD International Equity on October 17, 2024 and sell it today you would lose (14.00) from holding TD International Equity or give up 0.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD International Equity vs. Dow Jones Industrial
Performance |
| Timeline |
TD International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
TD International Equity
Pair trading matchups for TD International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with TD International and Dow Jones
The main advantage of trading using opposite TD International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD International position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| TD International vs. TD International Equity | TD International vs. TD Equity CAD | TD International vs. TD Canadian Equity | TD International vs. TD Canadian Aggregate |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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