Correlation Between TD Equity and IShares Flexible

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

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

Diversification Opportunities for TD Equity and IShares Flexible

0.43

Correlation Coefficient

TD Equity  IShares Flexible

Very weak diversification

The 3 months correlation between TPU and IShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding TD Equity Index and iShares Flexible Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Flexible Monthly and TD Equity 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 Equity Index are associated (or correlated) with IShares Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Flexible Monthly has no effect on the direction of TD Equity i.e., TD Equity and IShares Flexible go up and down completely randomly.

Pair Corralation between TD Equity and IShares Flexible

Assuming the 90 days trading horizon TD Equity Index is expected to generate 4.14 times more return on investment than IShares Flexible. However, TD Equity is 4.14 times more volatile than iShares Flexible Monthly. It trades about 0.14 of its potential returns per unit of risk. iShares Flexible Monthly is currently generating about -0.02 per unit of risk. If you would invest  2,928  in TD Equity Index on October 9, 2024 and sell it today you would earn a total of  1,928  from holding TD Equity Index or generate 65.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	12.75%
Values	Daily Returns

TD Equity Index  vs.  iShares Flexible Monthly

TD Equity Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Equity Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Flexible Monthly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Flexible Monthly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Flexible 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 Equity and IShares Flexible

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

The idea behind TD Equity Index and iShares Flexible Monthly 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.