Correlation Between TD Index and IA Clarington

Can any of the company-specific risk be diversified away by investing in both TD Index and IA Clarington 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 IA Clarington 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 IA Clarington Strategic, you can compare the effects of market volatilities on TD Index and IA Clarington 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 IA Clarington. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Index and IA Clarington.

Diversification Opportunities for TD Index and IA Clarington

0.76

Correlation Coefficient

TD Index  IA Clarington

Poor diversification

The 3 months correlation between 0P000071W8 and ISCB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund and IA Clarington Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IA Clarington Strategic 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 IA Clarington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IA Clarington Strategic has no effect on the direction of TD Index i.e., TD Index and IA Clarington go up and down completely randomly.

Pair Corralation between TD Index and IA Clarington

Assuming the 90 days trading horizon TD Index Fund is expected to under-perform the IA Clarington. In addition to that, TD Index is 6.14 times more volatile than IA Clarington Strategic. It trades about -0.11 of its total potential returns per unit of risk. IA Clarington Strategic is currently generating about -0.1 per unit of volatility. If you would invest  1,078  in IA Clarington Strategic on October 12, 2024 and sell it today you would lose (3.00) from holding IA Clarington Strategic or give up 0.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TD Index Fund  vs.  IA Clarington Strategic

TD Index Fund

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, TD Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IA Clarington Strategic

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA Clarington Strategic are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, IA Clarington is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TD Index and IA Clarington

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

The idea behind TD Index Fund and IA Clarington Strategic 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.