Correlation Between RBC Canadian and TD Dividend

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

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

Diversification Opportunities for RBC Canadian and TD Dividend

0.99

Correlation Coefficient

RBC Canadian  TD Dividend

No risk reduction

The 3 months correlation between RBC and 0P00016N6E is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Equity and TD Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Dividend Growth and RBC 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 RBC Canadian Equity are associated (or correlated) with TD Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Dividend Growth has no effect on the direction of RBC Canadian i.e., RBC Canadian and TD Dividend go up and down completely randomly.

Pair Corralation between RBC Canadian and TD Dividend

Assuming the 90 days trading horizon RBC Canadian is expected to generate 1.24 times less return on investment than TD Dividend. But when comparing it to its historical volatility, RBC Canadian Equity is 1.26 times less risky than TD Dividend. It trades about 0.46 of its potential returns per unit of risk. TD Dividend Growth is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  1,753  in TD Dividend Growth on April 20, 2025 and sell it today you would earn a total of  270.00  from holding TD Dividend Growth or generate 15.4% return on investment over 90 days.

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

RBC Canadian Equity  vs.  TD Dividend Growth

RBC Canadian Equity

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Canadian Equity are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, RBC Canadian may actually be approaching a critical reversion point that can send shares even higher in August 2025.

TD Dividend Growth

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TD Dividend Growth are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, TD Dividend sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Canadian and TD Dividend

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

The idea behind RBC Canadian Equity and TD Dividend Growth 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.