Correlation Between IShares Canadian and TD Select
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and TD Select 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 IShares Canadian and TD Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian Real and TD Select Short, you can compare the effects of market volatilities on IShares Canadian and TD Select 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 IShares Canadian with a short position of TD Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and TD Select.
Diversification Opportunities for IShares Canadian and TD Select
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and TCSB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Real and TD Select Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Select Short and IShares 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 iShares Canadian Real are associated (or correlated) with TD Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Select Short has no effect on the direction of IShares Canadian i.e., IShares Canadian and TD Select go up and down completely randomly.
Pair Corralation between IShares Canadian and TD Select
Assuming the 90 days trading horizon IShares Canadian is expected to generate 1.11 times less return on investment than TD Select. In addition to that, IShares Canadian is 4.37 times more volatile than TD Select Short. It trades about 0.04 of its total potential returns per unit of risk. TD Select Short is currently generating about 0.2 per unit of volatility. If you would invest 1,348 in TD Select Short on September 14, 2024 and sell it today you would earn a total of 128.00 from holding TD Select Short or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
iShares Canadian Real vs. TD Select Short
Performance |
| Timeline |
| iShares Canadian Real |
| TD Select Short |
IShares Canadian and TD Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and TD Select
The main advantage of trading using opposite IShares Canadian and TD Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, TD Select 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 Select will offset losses from the drop in TD Select's long position.| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares Canadian Government | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Core Canadian |
| TD Select vs. iShares Canadian Universe | TD Select vs. iShares Canadian Real | TD Select vs. iShares Core Canadian | TD Select vs. iShares Core Canadian |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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