Correlation Between Vanguard FTSE and TD International

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

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

Diversification Opportunities for Vanguard FTSE and TD International

1.0

Correlation Coefficient

Vanguard FTSE  TD International

No risk reduction

The 3 months correlation between Vanguard and TPE is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and TD International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD International Equity and Vanguard FTSE 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 Vanguard FTSE Developed are associated (or correlated) with TD International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD International Equity has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and TD International go up and down completely randomly.

Pair Corralation between Vanguard FTSE and TD International

Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.12 times less return on investment than TD International. In addition to that, Vanguard FTSE is 1.03 times more volatile than TD International Equity. It trades about 0.16 of its total potential returns per unit of risk. TD International Equity is currently generating about 0.19 per unit of volatility. If you would invest  2,251  in TD International Equity on December 2, 2024 and sell it today you would earn a total of  166.00  from holding TD International Equity or generate 7.37% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  TD International Equity

Vanguard FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TD International Equity

Risk-Adjusted Performance

Good

Over the last 90 days TD International Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak technical and fundamental indicators, TD International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard FTSE and TD International

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

The idea behind Vanguard FTSE Developed and TD International Equity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.