Correlation Between IShares 1 and TD Active

Can any of the company-specific risk be diversified away by investing in both IShares 1 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 IShares 1 and TD Active into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 5 Year and TD Active Preferred, you can compare the effects of market volatilities on IShares 1 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 IShares 1 with a short position of TD Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and TD Active.

Diversification Opportunities for IShares 1 and TD Active

0.77

Correlation Coefficient

IShares 1  TD Active

Poor diversification

The 3 months correlation between IShares and TPRF is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and TD Active Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Preferred and IShares 1 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 iShares 1 5 Year 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 Preferred has no effect on the direction of IShares 1 i.e., IShares 1 and TD Active go up and down completely randomly.

Pair Corralation between IShares 1 and TD Active

Assuming the 90 days trading horizon iShares 1 5 Year is expected to under-perform the TD Active. But the etf apears to be less risky and, when comparing its historical volatility, iShares 1 5 Year is 3.86 times less risky than TD Active. The etf trades about -0.05 of its potential returns per unit of risk. The TD Active Preferred is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,094  in TD Active Preferred on October 7, 2024 and sell it today you would earn a total of  26.00  from holding TD Active Preferred or generate 2.38% return on investment over 90 days.

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

iShares 1 5 Year  vs.  TD Active Preferred

iShares 1 5

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares 1 is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD Active Preferred

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Active Preferred are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. 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 IShares 1 and TD Active

The main advantage of trading using opposite IShares 1 and TD Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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 iShares 1 5 Year and TD Active Preferred 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.