Correlation Between TD International and TD Equity
Can any of the company-specific risk be diversified away by investing in both TD International 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 International 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 International Equity and TD Equity CAD, you can compare the effects of market volatilities on TD International 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 International with a short position of TD Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD International and TD Equity.
Diversification Opportunities for TD International and TD Equity
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TPE and THU is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TD International Equity and TD Equity CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Equity CAD 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 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 CAD has no effect on the direction of TD International i.e., TD International and TD Equity go up and down completely randomly.
Pair Corralation between TD International and TD Equity
Assuming the 90 days trading horizon TD International Equity is expected to generate 0.72 times more return on investment than TD Equity. However, TD International Equity is 1.38 times less risky than TD Equity. It trades about 0.44 of its potential returns per unit of risk. TD Equity CAD is currently generating about 0.17 per unit of risk. If you would invest 2,228 in TD International Equity on November 3, 2024 and sell it today you would earn a total of 135.00 from holding TD International Equity or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD International Equity vs. TD Equity CAD
Performance |
| Timeline |
| TD International Equity |
| TD Equity CAD |
TD International and TD Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD International and TD Equity
The main advantage of trading using opposite TD International and TD Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD International 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 International vs. Purpose Core Dividend | TD International vs. Purpose Premium Yield | TD International vs. Purpose Monthly Income | TD International vs. Purpose Total Return |
| TD Equity vs. TD Equity Index | TD Equity vs. TD Canadian Equity | TD Equity vs. TD International Equity | TD Equity vs. TD International Equity |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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