Correlation Between IShares ESG and TD Canadian

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

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

Diversification Opportunities for IShares ESG and TD Canadian

-0.03

Correlation Coefficient

IShares ESG  TD Canadian

Good diversification

The 3 months correlation between IShares and TTP is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Advanced and TD Canadian Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Equity and IShares ESG 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 iShares ESG Advanced are associated (or correlated) with TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Equity has no effect on the direction of IShares ESG i.e., IShares ESG and TD Canadian go up and down completely randomly.

Pair Corralation between IShares ESG and TD Canadian

Assuming the 90 days trading horizon iShares ESG Advanced is expected to generate 0.79 times more return on investment than TD Canadian. However, iShares ESG Advanced is 1.26 times less risky than TD Canadian. It trades about -0.25 of its potential returns per unit of risk. TD Canadian Equity is currently generating about -0.21 per unit of risk. If you would invest  6,060  in iShares ESG Advanced on October 10, 2024 and sell it today you would lose (172.00) from holding iShares ESG Advanced or give up 2.84% of portfolio value over 90 days.

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

iShares ESG Advanced  vs.  TD Canadian Equity

iShares ESG Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

TD Canadian Equity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Equity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TD Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and TD Canadian

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

The idea behind iShares ESG Advanced and TD Canadian 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.