Correlation Between TD Q and Desjardins

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

By analyzing existing cross correlation between TD Q Canadian and Desjardins RI Canada, you can compare the effects of market volatilities on TD Q and Desjardins 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 Q with a short position of Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Q and Desjardins.

Diversification Opportunities for TD Q and Desjardins

0.83

Correlation Coefficient

TD Q  Desjardins

Very poor diversification

The 3 months correlation between TQCD and Desjardins is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding TD Q Canadian and Desjardins RI Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Canada and TD Q 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 Q Canadian are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Canada has no effect on the direction of TD Q i.e., TD Q and Desjardins go up and down completely randomly.

Pair Corralation between TD Q and Desjardins

Assuming the 90 days trading horizon TD Q Canadian is expected to under-perform the Desjardins. But the etf apears to be less risky and, when comparing its historical volatility, TD Q Canadian is 1.1 times less risky than Desjardins. The etf trades about -0.02 of its potential returns per unit of risk. The Desjardins RI Canada is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,211  in Desjardins RI Canada on December 24, 2024 and sell it today you would earn a total of  18.00  from holding Desjardins RI Canada or generate 0.56% return on investment over 90 days.

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

TD Q Canadian  vs.  Desjardins RI Canada

TD Q Canadian

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Q Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Q is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins RI Canada

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Canada are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins 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 Q and Desjardins

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

The idea behind TD Q Canadian and Desjardins RI Canada 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.