Correlation Between Evolve Banks and TD Active

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

By analyzing existing cross correlation between Evolve Banks Enhanced and TD Active Global, you can compare the effects of market volatilities on Evolve Banks and TD Active 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 Evolve Banks with a short position of TD Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolve Banks and TD Active.

Diversification Opportunities for Evolve Banks and TD Active

0.77

Correlation Coefficient

Evolve Banks  TD Active

Poor diversification

The 3 months correlation between Evolve and TGED is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Evolve Banks Enhanced and TD Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Global and Evolve Banks 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 Evolve Banks Enhanced are associated (or correlated) with TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Global has no effect on the direction of Evolve Banks i.e., Evolve Banks and TD Active go up and down completely randomly.

Pair Corralation between Evolve Banks and TD Active

Assuming the 90 days trading horizon Evolve Banks Enhanced is expected to under-perform the TD Active. In addition to that, Evolve Banks is 1.19 times more volatile than TD Active Global. It trades about -0.07 of its total potential returns per unit of risk. TD Active Global is currently generating about -0.01 per unit of volatility. If you would invest  2,760  in TD Active Global on December 2, 2024 and sell it today you would lose (18.00) from holding TD Active Global or give up 0.65% of portfolio value over 90 days.

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

Evolve Banks Enhanced  vs.  TD Active Global

Evolve Banks Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve Banks Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Banks is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD Active Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Active Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evolve Banks and TD Active

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

The idea behind Evolve Banks Enhanced and TD Active Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.