Correlation Between TD Canadian and TD Equity
Can any of the company-specific risk be diversified away by investing in both TD Canadian 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 Canadian 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 Canadian Equity and TD Equity Index, you can compare the effects of market volatilities on TD Canadian 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 Canadian with a short position of TD Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and TD Equity.
Diversification Opportunities for TD Canadian and TD Equity
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between TTP and TPU is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Equity and TD Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Equity Index 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 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 Index has no effect on the direction of TD Canadian i.e., TD Canadian and TD Equity go up and down completely randomly.
Pair Corralation between TD Canadian and TD Equity
Assuming the 90 days trading horizon TD Canadian is expected to generate 1.25 times less return on investment than TD Equity. But when comparing it to its historical volatility, TD Canadian Equity is 1.14 times less risky than TD Equity. It trades about 0.18 of its potential returns per unit of risk. TD Equity Index is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,340 in TD Equity Index on September 1, 2024 and sell it today you would earn a total of 1,485 from holding TD Equity Index or generate 44.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Canadian Equity vs. TD Equity Index
Performance |
| Timeline |
| TD Canadian Equity |
| TD Equity Index |
TD Canadian and TD Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Canadian and TD Equity
The main advantage of trading using opposite TD Canadian and TD Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian 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 Canadian vs. TD Equity Index | TD Canadian vs. TD International Equity | TD Canadian vs. TD Canadian Aggregate | TD Canadian vs. TD Q Canadian |
| TD Equity vs. BMO SP 500 | TD Equity vs. Vanguard SP 500 | TD Equity vs. iShares Core SP | TD Equity vs. BMO SP 500 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |