Correlation Between TD Canadian and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both TD Canadian and Vanguard FTSE 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 Vanguard FTSE 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 Vanguard FTSE Canada, you can compare the effects of market volatilities on TD Canadian and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and Vanguard FTSE.
Diversification Opportunities for TD Canadian and Vanguard FTSE
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TTP and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Equity and Vanguard FTSE Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canada has no effect on the direction of TD Canadian i.e., TD Canadian and Vanguard FTSE go up and down completely randomly.
Pair Corralation between TD Canadian and Vanguard FTSE
Assuming the 90 days trading horizon TD Canadian Equity is expected to under-perform the Vanguard FTSE. But the etf apears to be less risky and, when comparing its historical volatility, TD Canadian Equity is 1.01 times less risky than Vanguard FTSE. The etf trades about -0.01 of its potential returns per unit of risk. The Vanguard FTSE Canada is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,654 in Vanguard FTSE Canada on November 3, 2024 and sell it today you would earn a total of 20.00 from holding Vanguard FTSE Canada or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TD Canadian Equity vs. Vanguard FTSE Canada
Performance |
| Timeline |
| TD Canadian Equity |
| Vanguard FTSE Canada |
TD Canadian and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Canadian and Vanguard FTSE
The main advantage of trading using opposite TD Canadian and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE'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 |
| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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