Correlation Between TD Global and FT AlphaDEX

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

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

Diversification Opportunities for TD Global and FT AlphaDEX

0.96

Correlation Coefficient

TD Global  FT AlphaDEX

Almost no diversification

The 3 months correlation between TEC and FHG is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding TD Global Technology and FT AlphaDEX Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT AlphaDEX Industrials and TD Global 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 Global Technology are associated (or correlated) with FT AlphaDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT AlphaDEX Industrials has no effect on the direction of TD Global i.e., TD Global and FT AlphaDEX go up and down completely randomly.

Pair Corralation between TD Global and FT AlphaDEX

Assuming the 90 days trading horizon TD Global Technology is expected to generate 1.18 times more return on investment than FT AlphaDEX. However, TD Global is 1.18 times more volatile than FT AlphaDEX Industrials. It trades about 0.13 of its potential returns per unit of risk. FT AlphaDEX Industrials is currently generating about 0.11 per unit of risk. If you would invest  2,161  in TD Global Technology on September 5, 2024 and sell it today you would earn a total of  2,329  from holding TD Global Technology or generate 107.77% return on investment over 90 days.

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

TD Global Technology  vs.  FT AlphaDEX Industrials

TD Global Technology

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Global Technology are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, TD Global displayed solid returns over the last few months and may actually be approaching a breakup point.

FT AlphaDEX Industrials

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FT AlphaDEX Industrials are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, FT AlphaDEX displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Global and FT AlphaDEX

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

The idea behind TD Global Technology and FT AlphaDEX Industrials 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.