Correlation Between TD Active and TD Q

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

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

Diversification Opportunities for TD Active and TD Q

0.44

Correlation Coefficient

TD Active  TD Q

Very weak diversification

The 3 months correlation between TUED and TQCD is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TD Active Enhanced and TD Q Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Q Canadian and TD Active 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 Active Enhanced are associated (or correlated) with TD Q. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Q Canadian has no effect on the direction of TD Active i.e., TD Active and TD Q go up and down completely randomly.

Pair Corralation between TD Active and TD Q

Assuming the 90 days trading horizon TD Active Enhanced is expected to under-perform the TD Q. In addition to that, TD Active is 2.34 times more volatile than TD Q Canadian. It trades about -0.17 of its total potential returns per unit of risk. TD Q Canadian is currently generating about 0.0 per unit of volatility. If you would invest  1,976  in TD Q Canadian on December 29, 2024 and sell it today you would lose (7.00) from holding TD Q Canadian or give up 0.35% of portfolio value over 90 days.

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

TD Active Enhanced  vs.  TD Q Canadian

TD Active Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Active Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

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.

Pair Trading with TD Active and TD Q

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

The idea behind TD Active Enhanced and TD Q Canadian 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.