Correlation Between TD Equity and TD Canadian
Can any of the company-specific risk be diversified away by investing in both TD Equity and TD Canadian 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 Equity and TD Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Equity CAD and TD Canadian Equity, you can compare the effects of market volatilities on TD Equity and TD Canadian 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 Equity with a short position of TD Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Equity and TD Canadian.
Diversification Opportunities for TD Equity and TD Canadian
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between THU and TTP is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding TD Equity CAD and TD Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Equity and TD Equity 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 Equity CAD are associated (or correlated) with TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Equity has no effect on the direction of TD Equity i.e., TD Equity and TD Canadian go up and down completely randomly.
Pair Corralation between TD Equity and TD Canadian
Assuming the 90 days trading horizon TD Equity CAD is expected to generate 1.9 times more return on investment than TD Canadian. However, TD Equity is 1.9 times more volatile than TD Canadian Equity. It trades about 0.37 of its potential returns per unit of risk. TD Canadian Equity is currently generating about 0.63 per unit of risk. If you would invest 3,798 in TD Equity CAD on September 3, 2024 and sell it today you would earn a total of 247.00 from holding TD Equity CAD or generate 6.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Equity CAD vs. TD Canadian Equity
Performance |
| Timeline |
| TD Equity CAD |
| TD Canadian Equity |
TD Equity and TD Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Equity and TD Canadian
The main advantage of trading using opposite TD Equity and TD Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Equity position performs unexpectedly, TD Canadian 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 Canadian will offset losses from the drop in TD Canadian's long position.| TD Equity vs. Franklin Bissett Corporate | TD Equity vs. FT AlphaDEX Industrials | TD Equity vs. Dynamic Active Dividend | TD Equity vs. BMO Aggregate Bond |
| TD Canadian vs. Mackenzie Large Cap | TD Canadian vs. Goldman Sachs ActiveBeta | TD Canadian vs. BMO MSCI EAFE | TD Canadian vs. BMO Long Federal |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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