Correlation Between TD International and TD Active

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

Diversification Opportunities for TD International and TD Active

-0.55

Correlation Coefficient

TD International  TD Active

Excellent diversification

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

Pair Corralation between TD International and TD Active

Assuming the 90 days trading horizon TD International Equity is expected to generate 0.67 times more return on investment than TD Active. However, TD International Equity is 1.49 times less risky than TD Active. It trades about 0.2 of its potential returns per unit of risk. TD Active Global is currently generating about -0.06 per unit of risk. If you would invest  2,231  in TD International Equity on December 28, 2024 and sell it today you would earn a total of  207.00  from holding TD International Equity or generate 9.28% return on investment over 90 days.

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

TD International Equity  vs.  TD Active Global

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 15 (%) 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.

TD Active Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Active Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Active 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 International and TD Active

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

The idea behind TD International Equity and TD Active Global 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.