Correlation Between TD Canadian and Brompton Global

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

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

Diversification Opportunities for TD Canadian and Brompton Global

0.44

Correlation Coefficient

TD Canadian  Brompton Global

Very weak diversification

The 3 months correlation between TCLB and Brompton is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Long and Brompton Global Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Global Dividend and TD 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 TD Canadian Long are associated (or correlated) with Brompton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Global Dividend has no effect on the direction of TD Canadian i.e., TD Canadian and Brompton Global go up and down completely randomly.

Pair Corralation between TD Canadian and Brompton Global

Assuming the 90 days trading horizon TD Canadian is expected to generate 1.45 times less return on investment than Brompton Global. But when comparing it to its historical volatility, TD Canadian Long is 1.33 times less risky than Brompton Global. It trades about 0.05 of its potential returns per unit of risk. Brompton Global Dividend is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,129  in Brompton Global Dividend on December 30, 2024 and sell it today you would earn a total of  71.00  from holding Brompton Global Dividend or generate 3.33% return on investment over 90 days.

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

TD Canadian Long  vs.  Brompton Global Dividend

TD Canadian Long

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Long are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TD Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton Global Dividend

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Global Dividend are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TD Canadian and Brompton Global

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

The idea behind TD Canadian Long and Brompton Global Dividend 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.