Correlation Between TD Equity and IShares SPTSX

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

Diversification Opportunities for TD Equity and IShares SPTSX

-0.76

Correlation Coefficient

TD Equity  IShares SPTSX

Pay attention - limited upside

The 3 months correlation between TPU and IShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding TD Equity Index and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped 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 SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of TD Equity i.e., TD Equity and IShares SPTSX go up and down completely randomly.

Pair Corralation between TD Equity and IShares SPTSX

Assuming the 90 days trading horizon TD Equity Index is expected to generate 0.89 times more return on investment than IShares SPTSX. However, TD Equity Index is 1.13 times less risky than IShares SPTSX. It trades about -0.11 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about -0.15 per unit of risk. If you would invest  4,919  in TD Equity Index on October 10, 2024 and sell it today you would lose (111.00) from holding TD Equity Index or give up 2.26% of portfolio value over 90 days.

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

TD Equity Index  vs.  iShares SPTSX Capped

TD Equity Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Equity Index are ranked lower than 9 (%) 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 SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with TD Equity and IShares SPTSX

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

The idea behind TD Equity Index and iShares SPTSX Capped 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.