Correlation Between TD Equity and IShares IG
Can any of the company-specific risk be diversified away by investing in both TD Equity and IShares IG 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 IG 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 IG Corporate, you can compare the effects of market volatilities on TD Equity and IShares IG 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 IG. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Equity and IShares IG.
Diversification Opportunities for TD Equity and IShares IG
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TPU and IShares is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding TD Equity Index and iShares IG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IG Corporate 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 IG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IG Corporate has no effect on the direction of TD Equity i.e., TD Equity and IShares IG go up and down completely randomly.
Pair Corralation between TD Equity and IShares IG
Assuming the 90 days trading horizon TD Equity Index is expected to under-perform the IShares IG. In addition to that, TD Equity is 2.31 times more volatile than iShares IG Corporate. It trades about -0.08 of its total potential returns per unit of risk. iShares IG Corporate is currently generating about 0.08 per unit of volatility. If you would invest 1,939 in iShares IG Corporate on December 26, 2024 and sell it today you would earn a total of 39.00 from holding iShares IG Corporate or generate 2.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
TD Equity Index vs. iShares IG Corporate
Performance |
Timeline |
TD Equity Index |
iShares IG Corporate |
TD Equity and IShares IG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TD Equity and IShares IG
The main advantage of trading using opposite TD Equity and IShares IG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Equity position performs unexpectedly, IShares IG 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 IG will offset losses from the drop in IShares IG's long position.TD Equity vs. TD Canadian Equity | TD Equity vs. TD International Equity | TD Equity vs. TD Equity CAD | TD Equity vs. TD Canadian Aggregate |
IShares IG vs. iShares JP Morgan | IShares IG vs. iShares High Yield | IShares IG vs. iShares 1 10Yr Laddered | IShares IG vs. iShares Canadian HYBrid |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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