Correlation Between Financial and TD International

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

By analyzing existing cross correlation between Financial 15 Split and TD International Equity, you can compare the effects of market volatilities on Financial 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 Financial with a short position of TD International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and TD International.

Diversification Opportunities for Financial and TD International

-0.43

Correlation Coefficient

Financial  TD International

Very good diversification

The 3 months correlation between Financial and TPE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split 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 Financial 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 Financial 15 Split 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 Financial i.e., Financial and TD International go up and down completely randomly.

Pair Corralation between Financial and TD International

Assuming the 90 days trading horizon Financial 15 Split is expected to under-perform the TD International. In addition to that, Financial is 2.3 times more volatile than TD International Equity. It trades about -0.04 of its total potential returns per unit of risk. TD International Equity is currently generating about 0.18 per unit of volatility. If you would invest  2,218  in TD International Equity on December 29, 2024 and sell it today you would earn a total of  185.00  from holding TD International Equity or generate 8.34% return on investment over 90 days.

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

Financial 15 Split  vs.  TD International Equity

Financial 15 Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial 15 Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Financial 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD International Equity are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, TD International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Financial and TD International

The main advantage of trading using opposite Financial and TD International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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 Financial 15 Split 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.