Correlation Between TD Comfort and TD Index

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

Diversification Opportunities for TD Comfort and TD Index

0.86

Correlation Coefficient

TD Comfort  TD Index

Very poor diversification

The 3 months correlation between 0P0001FAU8 and TDB902 is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TD Comfort Balanced and TD Index Fund E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Index Fund 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 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Index Fund has no effect on the direction of TD Comfort i.e., TD Comfort and TD Index go up and down completely randomly.

Pair Corralation between TD Comfort and TD Index

Assuming the 90 days trading horizon TD Comfort is expected to generate 3.29 times less return on investment than TD Index. But when comparing it to its historical volatility, TD Comfort Balanced is 2.46 times less risky than TD Index. It trades about 0.2 of its potential returns per unit of risk. TD Index Fund E is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,431  in TD Index Fund E on September 13, 2024 and sell it today you would earn a total of  1,708  from holding TD Index Fund E or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

TD Comfort Balanced  vs.  TD Index Fund E

TD Comfort Balanced

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Comfort Balanced are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical and fundamental indicators, TD Comfort is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TD Index Fund

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund E are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental drivers, TD Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TD Comfort and TD Index

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

The idea behind TD Comfort Balanced and TD Index Fund E 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 Anywhere module to track or share privately all of your investments from the convenience of any device.