Correlation Between TD Canadian and TD Q

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

By analyzing existing cross correlation between TD Canadian Aggregate and TD Q Canadian, you can compare the effects of market volatilities on TD Canadian and TD Q 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 TD Q. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and TD Q.

Diversification Opportunities for TD Canadian and TD Q

0.55

Correlation Coefficient

TD Canadian  TD Q

Very weak diversification

The 3 months correlation between TDB and TQCD is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Aggregate and TD Q Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Q Canadian 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 Aggregate are associated (or correlated) with TD Q. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Q Canadian has no effect on the direction of TD Canadian i.e., TD Canadian and TD Q go up and down completely randomly.

Pair Corralation between TD Canadian and TD Q

Assuming the 90 days trading horizon TD Canadian Aggregate is expected to generate 0.58 times more return on investment than TD Q. However, TD Canadian Aggregate is 1.72 times less risky than TD Q. It trades about -0.01 of its potential returns per unit of risk. TD Q Canadian is currently generating about -0.08 per unit of risk. If you would invest  1,308  in TD Canadian Aggregate on October 10, 2024 and sell it today you would lose (3.00) from holding TD Canadian Aggregate or give up 0.23% of portfolio value over 90 days.

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

TD Canadian Aggregate  vs.  TD Q Canadian

TD Canadian Aggregate

Risk-Adjusted Performance

4 of 100

Insignificant

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

TD Q Canadian

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TD Q Canadian are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TD Q 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 TD Q

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

The idea behind TD Canadian Aggregate and TD Q Canadian 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.