Correlation Between TD Index and TD Canadian

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

Diversification Opportunities for TD Index and TD Canadian

0.58

Correlation Coefficient

TD Index  TD Canadian

Very weak diversification

The 3 months correlation between 0P000071W8 and TDB909 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund and TD Canadian Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Bond 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 TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Bond has no effect on the direction of TD Index i.e., TD Index and TD Canadian go up and down completely randomly.

Pair Corralation between TD Index and TD Canadian

Assuming the 90 days trading horizon TD Index Fund is expected to generate 3.09 times more return on investment than TD Canadian. However, TD Index is 3.09 times more volatile than TD Canadian Bond. It trades about -0.05 of its potential returns per unit of risk. TD Canadian Bond is currently generating about -0.17 per unit of risk. If you would invest  15,204  in TD Index Fund on October 10, 2024 and sell it today you would lose (165.00) from holding TD Index Fund or give up 1.09% of portfolio value over 90 days.

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

TD Index Fund  vs.  TD Canadian Bond

TD Index Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, TD Index may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TD Canadian Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental drivers, TD Canadian 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 TD Canadian

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

The idea behind TD Index Fund and TD Canadian Bond 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.