Correlation Between Wealthsimple Developed and TD International

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

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

Diversification Opportunities for Wealthsimple Developed and TD International

0.89

Correlation Coefficient

Wealthsimple Developed  TD International

Very poor diversification

The 3 months correlation between Wealthsimple and TPE is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wealthsimple Developed Markets 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 Wealthsimple Developed 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 Wealthsimple Developed Markets 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 Wealthsimple Developed i.e., Wealthsimple Developed and TD International go up and down completely randomly.

Pair Corralation between Wealthsimple Developed and TD International

Assuming the 90 days trading horizon Wealthsimple Developed is expected to generate 1.08 times less return on investment than TD International. But when comparing it to its historical volatility, Wealthsimple Developed Markets is 1.01 times less risky than TD International. It trades about 0.09 of its potential returns per unit of risk. TD International Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,880  in TD International Equity on September 12, 2024 and sell it today you would earn a total of  413.00  from holding TD International Equity or generate 21.97% return on investment over 90 days.

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

Wealthsimple Developed Markets  vs.  TD International Equity

Wealthsimple Developed

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wealthsimple Developed Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wealthsimple Developed is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD International Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TD International Equity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, TD International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wealthsimple Developed and TD International

The main advantage of trading using opposite Wealthsimple Developed and TD International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthsimple Developed 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 Wealthsimple Developed Markets 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.