Correlation Between TD International and IShares ESG

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

By analyzing existing cross correlation between TD International Equity and iShares ESG Aware, you can compare the effects of market volatilities on TD International and IShares ESG 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 International with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD International and IShares ESG.

Diversification Opportunities for TD International and IShares ESG

0.93

Correlation Coefficient

TD International  IShares ESG

Almost no diversification

The 3 months correlation between THE and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding TD International Equity and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and TD International 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 International Equity are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of TD International i.e., TD International and IShares ESG go up and down completely randomly.

Pair Corralation between TD International and IShares ESG

Assuming the 90 days trading horizon TD International is expected to generate 1.63 times less return on investment than IShares ESG. But when comparing it to its historical volatility, TD International Equity is 1.15 times less risky than IShares ESG. It trades about 0.16 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,582  in iShares ESG Aware on December 20, 2024 and sell it today you would earn a total of  297.00  from holding iShares ESG Aware or generate 11.5% return on investment over 90 days.

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

TD International Equity  vs.  iShares ESG Aware

TD International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD International Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, TD International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares ESG Aware

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TD International and IShares ESG

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

The idea behind TD International Equity and iShares ESG Aware 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.