Correlation Between TD Index and RBC Dividend

Can any of the company-specific risk be diversified away by investing in both TD Index and RBC Dividend 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 Index and RBC Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TD Index Fund and RBC Dividend Cur, you can compare the effects of market volatilities on TD Index and RBC Dividend 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 Index with a short position of RBC Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Index and RBC Dividend.

Diversification Opportunities for TD Index and RBC Dividend

0.04

Correlation Coefficient

TD Index  RBC Dividend

Significant diversification

The 3 months correlation between 0P000071W8 and RBC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund and RBC Dividend Cur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Dividend Cur and TD Index 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 Index Fund are associated (or correlated) with RBC Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Dividend Cur has no effect on the direction of TD Index i.e., TD Index and RBC Dividend go up and down completely randomly.

Pair Corralation between TD Index and RBC Dividend

Assuming the 90 days trading horizon TD Index Fund is expected to generate 0.99 times more return on investment than RBC Dividend. However, TD Index Fund is 1.01 times less risky than RBC Dividend. It trades about 0.01 of its potential returns per unit of risk. RBC Dividend Cur is currently generating about -0.11 per unit of risk. If you would invest  14,966  in TD Index Fund on November 29, 2024 and sell it today you would earn a total of  36.00  from holding TD Index Fund or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

TD Index Fund  vs.  RBC Dividend Cur

TD Index Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Index Fund has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, TD Index is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

RBC Dividend Cur

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBC Dividend Cur has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TD Index and RBC Dividend

The main advantage of trading using opposite TD Index and RBC Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Index position performs unexpectedly, RBC Dividend 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 RBC Dividend will offset losses from the drop in RBC Dividend's long position.

The idea behind TD Index Fund and RBC Dividend Cur pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.