Correlation Between TD Global and Vanguard FTSE

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

Diversification Opportunities for TD Global and Vanguard FTSE

-0.39

Correlation Coefficient

TD Global  Vanguard FTSE

Very good diversification

The 3 months correlation between TEC and Vanguard is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding TD Global Technology and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canadian 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canadian has no effect on the direction of TD Global i.e., TD Global and Vanguard FTSE go up and down completely randomly.

Pair Corralation between TD Global and Vanguard FTSE

Assuming the 90 days trading horizon TD Global Technology is expected to generate 1.28 times more return on investment than Vanguard FTSE. However, TD Global is 1.28 times more volatile than Vanguard FTSE Canadian. It trades about 0.24 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about 0.04 per unit of risk. If you would invest  3,779  in TD Global Technology on September 3, 2024 and sell it today you would earn a total of  647.00  from holding TD Global Technology or generate 17.12% return on investment over 90 days.

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

TD Global Technology  vs.  Vanguard FTSE Canadian

TD Global Technology

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Global Technology are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, TD Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard FTSE Canadian

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Canadian are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Vanguard FTSE 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 Global and Vanguard FTSE

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

The idea behind TD Global Technology and Vanguard FTSE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.