Correlation Between TD Canadian and Global X

Can any of the company-specific risk be diversified away by investing in both TD Canadian and Global X 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 Global X 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 Global X Gold, you can compare the effects of market volatilities on TD Canadian and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and Global X.

Diversification Opportunities for TD Canadian and Global X

0.38

Correlation Coefficient

TD Canadian  Global X

Weak diversification

The 3 months correlation between TCLB and Global is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Long and Global X Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Gold 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Gold has no effect on the direction of TD Canadian i.e., TD Canadian and Global X go up and down completely randomly.

Pair Corralation between TD Canadian and Global X

Assuming the 90 days trading horizon TD Canadian is expected to generate 11.52 times less return on investment than Global X. But when comparing it to its historical volatility, TD Canadian Long is 2.38 times less risky than Global X. It trades about 0.03 of its potential returns per unit of risk. Global X Gold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,694  in Global X Gold on November 29, 2024 and sell it today you would earn a total of  375.00  from holding Global X Gold or generate 13.92% return on investment over 90 days.

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

TD Canadian Long  vs.  Global X Gold

TD Canadian Long

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Long are ranked lower than 2 (%) 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.

Global X Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Global X displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Canadian and Global X

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

The idea behind TD Canadian Long and Global X Gold 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.