Correlation Between Desjardins Canadian and TD International

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

By analyzing existing cross correlation between Desjardins Canadian Universe and TD International Equity, you can compare the effects of market volatilities on Desjardins Canadian and TD International 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 Desjardins Canadian with a short position of TD International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins Canadian and TD International.

Diversification Opportunities for Desjardins Canadian and TD International

0.42

Correlation Coefficient

Desjardins Canadian  TD International

Very weak diversification

The 3 months correlation between Desjardins and TPE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins Canadian Universe and TD International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD International Equity and Desjardins Canadian 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 Desjardins Canadian Universe are associated (or correlated) with TD International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD International Equity has no effect on the direction of Desjardins Canadian i.e., Desjardins Canadian and TD International go up and down completely randomly.

Pair Corralation between Desjardins Canadian and TD International

Assuming the 90 days trading horizon Desjardins Canadian Universe is expected to generate 0.48 times more return on investment than TD International. However, Desjardins Canadian Universe is 2.1 times less risky than TD International. It trades about -0.25 of its potential returns per unit of risk. TD International Equity is currently generating about -0.17 per unit of risk. If you would invest  1,813  in Desjardins Canadian Universe on October 10, 2024 and sell it today you would lose (26.00) from holding Desjardins Canadian Universe or give up 1.43% of portfolio value over 90 days.

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

Desjardins Canadian Universe  vs.  TD International Equity

Desjardins Canadian

Risk-Adjusted Performance

5 of 100

Modest

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

TD International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Desjardins Canadian and TD International

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

The idea behind Desjardins Canadian Universe and TD International Equity 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.