Correlation Between TD Q and TD Active
Can any of the company-specific risk be diversified away by investing in both TD Q and TD Active 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 Q and TD Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Q Global and TD Active Enhanced, you can compare the effects of market volatilities on TD Q and TD Active 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 Q with a short position of TD Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Q and TD Active.
Diversification Opportunities for TD Q and TD Active
Almost no diversification
The 3 months correlation between TQGD and TUED is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding TD Q Global and TD Active Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Enhanced and TD Q 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 Q Global are associated (or correlated) with TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Enhanced has no effect on the direction of TD Q i.e., TD Q and TD Active go up and down completely randomly.
Pair Corralation between TD Q and TD Active
Assuming the 90 days trading horizon TD Q is expected to generate 1.78 times less return on investment than TD Active. But when comparing it to its historical volatility, TD Q Global is 1.27 times less risky than TD Active. It trades about 0.11 of its potential returns per unit of risk. TD Active Enhanced is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,746 in TD Active Enhanced on August 29, 2024 and sell it today you would earn a total of 1,395 from holding TD Active Enhanced or generate 79.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Q Global vs. TD Active Enhanced
Performance |
| Timeline |
| TD Q Global |
| TD Active Enhanced |
TD Q and TD Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Q and TD Active
The main advantage of trading using opposite TD Q and TD Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Q position performs unexpectedly, TD Active 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 Active will offset losses from the drop in TD Active's long position.| TD Q vs. Global Atomic Corp | TD Q vs. enCore Energy Corp | TD Q vs. Fission Uranium Corp | TD Q vs. NexGen Energy |
| TD Active vs. TD Active Global | TD Active vs. TD Q Canadian | TD Active vs. TD Q Global | TD Active vs. TD Active Global |
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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