Correlation Between IShares Canadian and TD Monthly

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

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

Diversification Opportunities for IShares Canadian and TD Monthly

0.84

Correlation Coefficient

IShares Canadian  TD Monthly

Very poor diversification

The 3 months correlation between IShares and 0P00016N5D is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and TD Monthly Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Monthly Income and IShares Canadian 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 Canadian HYBrid are associated (or correlated) with TD Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Monthly Income has no effect on the direction of IShares Canadian i.e., IShares Canadian and TD Monthly go up and down completely randomly.

Pair Corralation between IShares Canadian and TD Monthly

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 1.6 times more return on investment than TD Monthly. However, IShares Canadian is 1.6 times more volatile than TD Monthly Income. It trades about 0.07 of its potential returns per unit of risk. TD Monthly Income is currently generating about 0.07 per unit of risk. If you would invest  1,574  in iShares Canadian HYBrid on September 15, 2024 and sell it today you would earn a total of  419.00  from holding iShares Canadian HYBrid or generate 26.62% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  TD Monthly Income

iShares Canadian HYBrid

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD Monthly Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Monthly Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, TD Monthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Canadian and TD Monthly

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

The idea behind iShares Canadian HYBrid and TD Monthly Income 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 Stocks Directory module to find actively traded stocks across global markets.