Correlation Between IShares MSCI and TD Canadian

Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Min and TD Canadian Equity, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of TD Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and TD Canadian.

Diversification Opportunities for IShares MSCI and TD Canadian

0.12

Correlation Coefficient

IShares MSCI  TD Canadian

Average diversification

The 3 months correlation between IShares and TTP is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Min 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 MSCI 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 MSCI Min 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 MSCI i.e., IShares MSCI and TD Canadian go up and down completely randomly.

Pair Corralation between IShares MSCI and TD Canadian

Assuming the 90 days trading horizon iShares MSCI Min is expected to under-perform the TD Canadian. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Min is 1.32 times less risky than TD Canadian. The etf trades about -0.02 of its potential returns per unit of risk. The TD Canadian Equity is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,693  in TD Canadian Equity on October 9, 2024 and sell it today you would earn a total of  162.00  from holding TD Canadian Equity or generate 6.02% return on investment over 90 days.

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

iShares MSCI Min  vs.  TD Canadian Equity

iShares MSCI Min

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Min has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, IShares MSCI 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Canadian Equity are ranked lower than 11 (%) 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 MSCI and TD Canadian

The main advantage of trading using opposite IShares MSCI and TD Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI Min 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.