Correlation Between TD Canadian and IShares MSCI

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

Diversification Opportunities for TD Canadian and IShares MSCI

0.68

Correlation Coefficient

TD Canadian  IShares MSCI

Poor diversification

The 3 months correlation between TDB and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Aggregate and iShares MSCI Min in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Min 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Min has no effect on the direction of TD Canadian i.e., TD Canadian and IShares MSCI go up and down completely randomly.

Pair Corralation between TD Canadian and IShares MSCI

Assuming the 90 days trading horizon TD Canadian is expected to generate 5.34 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, TD Canadian Aggregate is 1.62 times less risky than IShares MSCI. It trades about 0.09 of its potential returns per unit of risk. iShares MSCI Min is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,848  in iShares MSCI Min on December 20, 2024 and sell it today you would earn a total of  434.00  from holding iShares MSCI Min or generate 11.28% return on investment over 90 days.

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

TD Canadian Aggregate  vs.  iShares MSCI Min

TD Canadian Aggregate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Aggregate are ranked lower than 6 (%) 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.

iShares MSCI Min

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Min are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TD Canadian and IShares MSCI

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

The idea behind TD Canadian Aggregate and iShares MSCI Min 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.