Correlation Between TD Canadian and BetaPro Crude

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

Diversification Opportunities for TD Canadian and BetaPro Crude

-0.35

Correlation Coefficient

TD Canadian  BetaPro Crude

Very good diversification

The 3 months correlation between TCLB and BetaPro is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Long and BetaPro Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro Crude Oil 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 BetaPro Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro Crude Oil has no effect on the direction of TD Canadian i.e., TD Canadian and BetaPro Crude go up and down completely randomly.

Pair Corralation between TD Canadian and BetaPro Crude

Assuming the 90 days trading horizon TD Canadian is expected to generate 1.26 times less return on investment than BetaPro Crude. But when comparing it to its historical volatility, TD Canadian Long is 6.42 times less risky than BetaPro Crude. It trades about 0.03 of its potential returns per unit of risk. BetaPro Crude Oil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,178  in BetaPro Crude Oil on September 3, 2024 and sell it today you would lose (49.00) from holding BetaPro Crude Oil or give up 4.16% of portfolio value over 90 days.

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

TD Canadian Long  vs.  BetaPro Crude Oil

TD Canadian Long

Risk-Adjusted Performance

2 of 100

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.

BetaPro Crude Oil

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TD Canadian and BetaPro Crude

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

The idea behind TD Canadian Long and BetaPro Crude Oil 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.