Correlation Between TD Comfort and TD Canadian

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

Diversification Opportunities for TD Comfort and TD Canadian

0.81

Correlation Coefficient

TD Comfort  TD Canadian

Very poor diversification

The 3 months correlation between 0P0001FAU8 and TDB900 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TD Comfort Balanced and TD Canadian Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Index and TD Comfort 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 Comfort Balanced 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 Index has no effect on the direction of TD Comfort i.e., TD Comfort and TD Canadian go up and down completely randomly.

Pair Corralation between TD Comfort and TD Canadian

Assuming the 90 days trading horizon TD Comfort is expected to generate 1.89 times less return on investment than TD Canadian. But when comparing it to its historical volatility, TD Comfort Balanced is 1.93 times less risky than TD Canadian. It trades about 0.07 of its potential returns per unit of risk. TD Canadian Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,337  in TD Canadian Index on October 11, 2024 and sell it today you would earn a total of  864.00  from holding TD Canadian Index or generate 25.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.19%
Values	Daily Returns

TD Comfort Balanced  vs.  TD Canadian Index

TD Comfort Balanced

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days TD Comfort Balanced has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, TD Comfort is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

TD Canadian Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TD Canadian Index has generated negative risk-adjusted returns adding no value to fund investors. 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 Comfort and TD Canadian

The main advantage of trading using opposite TD Comfort and TD Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Comfort 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 Comfort Balanced and TD Canadian Index 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.