Correlation Between TD Canadian and Desjardins
Can any of the company-specific risk be diversified away by investing in both TD Canadian and Desjardins 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 Canadian and Desjardins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Canadian Equity and Desjardins RI Canada, you can compare the effects of market volatilities on TD Canadian and Desjardins 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 Canadian with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and Desjardins.
Diversification Opportunities for TD Canadian and Desjardins
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between TTP and Desjardins is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Equity and Desjardins RI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Canada and TD Canadian 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 Canadian Equity are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Canada has no effect on the direction of TD Canadian i.e., TD Canadian and Desjardins go up and down completely randomly.
Pair Corralation between TD Canadian and Desjardins
Assuming the 90 days trading horizon TD Canadian is expected to generate 1.19 times less return on investment than Desjardins. But when comparing it to its historical volatility, TD Canadian Equity is 1.38 times less risky than Desjardins. It trades about 0.64 of its potential returns per unit of risk. Desjardins RI Canada is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 3,123 in Desjardins RI Canada on September 1, 2024 and sell it today you would earn a total of 229.00 from holding Desjardins RI Canada or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
TD Canadian Equity vs. Desjardins RI Canada
Performance |
| Timeline |
| TD Canadian Equity |
| Desjardins RI Canada |
TD Canadian and Desjardins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Canadian and Desjardins
The main advantage of trading using opposite TD Canadian and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.| TD Canadian vs. TD Equity Index | TD Canadian vs. TD International Equity | TD Canadian vs. TD Canadian Aggregate | TD Canadian vs. TD Q Canadian |
| Desjardins vs. iShares SPTSX 60 | Desjardins vs. iShares Core SPTSX | Desjardins vs. Vanguard FTSE Canada | Desjardins vs. Global X SPTSX |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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