Correlation Between Dynamic Active and TD Q

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

By analyzing existing cross correlation between Dynamic Active Canadian and TD Q Small Mid Cap, you can compare the effects of market volatilities on Dynamic Active and TD Q 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 Dynamic Active with a short position of TD Q. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and TD Q.

Diversification Opportunities for Dynamic Active and TD Q

0.92

Correlation Coefficient

Dynamic Active  TD Q

Almost no diversification

The 3 months correlation between Dynamic and TQSM is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Canadian and TD Q Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Q Small and Dynamic Active 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 Dynamic Active Canadian are associated (or correlated) with TD Q. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Q Small has no effect on the direction of Dynamic Active i.e., Dynamic Active and TD Q go up and down completely randomly.

Pair Corralation between Dynamic Active and TD Q

Assuming the 90 days trading horizon Dynamic Active is expected to generate 1.23 times less return on investment than TD Q. But when comparing it to its historical volatility, Dynamic Active Canadian is 2.6 times less risky than TD Q. It trades about 0.35 of its potential returns per unit of risk. TD Q Small Mid Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,175  in TD Q Small Mid Cap on April 23, 2025 and sell it today you would earn a total of  241.00  from holding TD Q Small Mid Cap or generate 11.08% return on investment over 90 days.

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

Dynamic Active Canadian  vs.  TD Q Small Mid Cap

Dynamic Active Canadian

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Canadian are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

TD Q Small

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Q Small Mid Cap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD Q may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Dynamic Active and TD Q

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

The idea behind Dynamic Active Canadian and TD Q Small Mid Cap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.