Correlation Between IShares Core and TD Equity

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

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

Diversification Opportunities for IShares Core and TD Equity

0.99

Correlation Coefficient

IShares Core  TD Equity

No risk reduction

The 3 months correlation between IShares and TPU is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and TD Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Equity Index and IShares Core 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 Core SP are associated (or correlated) with TD Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Equity Index has no effect on the direction of IShares Core i.e., IShares Core and TD Equity go up and down completely randomly.

Pair Corralation between IShares Core and TD Equity

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.97 times more return on investment than TD Equity. However, iShares Core SP is 1.03 times less risky than TD Equity. It trades about -0.08 of its potential returns per unit of risk. TD Equity Index is currently generating about -0.1 per unit of risk. If you would invest  5,309  in iShares Core SP on December 23, 2024 and sell it today you would lose (264.00) from holding iShares Core SP or give up 4.97% of portfolio value over 90 days.

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

iShares Core SP  vs.  TD Equity Index

iShares Core SP

Risk-Adjusted Performance

Very Weak

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

TD Equity Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Equity Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Equity 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 Core and TD Equity

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

The idea behind iShares Core SP and TD Equity Index 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.