Correlation Between TD Canadian and IShares Core
Can any of the company-specific risk be diversified away by investing in both TD Canadian and IShares Core 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 IShares Core 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 iShares Core SPTSX, you can compare the effects of market volatilities on TD Canadian and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and IShares Core.
Diversification Opportunities for TD Canadian and IShares Core
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between TTP and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Equity and iShares Core SPTSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SPTSX 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SPTSX has no effect on the direction of TD Canadian i.e., TD Canadian and IShares Core go up and down completely randomly.
Pair Corralation between TD Canadian and IShares Core
Assuming the 90 days trading horizon TD Canadian Equity is expected to generate 0.99 times more return on investment than IShares Core. However, TD Canadian Equity is 1.01 times less risky than IShares Core. It trades about 0.36 of its potential returns per unit of risk. iShares Core SPTSX is currently generating about 0.36 per unit of risk. If you would invest 2,800 in TD Canadian Equity on August 31, 2024 and sell it today you would earn a total of 126.00 from holding TD Canadian Equity or generate 4.5% 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. iShares Core SPTSX
Performance |
| Timeline |
| TD Canadian Equity |
| iShares Core SPTSX |
TD Canadian and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TD Canadian and IShares Core
The main advantage of trading using opposite TD Canadian and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core'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 |
| IShares Core vs. iShares SPTSX 60 | IShares Core vs. iShares Core SP | IShares Core vs. iShares SPTSX Composite | IShares Core vs. iShares Core MSCI |
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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