Correlation Between Dynamic Active and TD Active

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

By analyzing existing cross correlation between Dynamic Active Preferred and TD Active Preferred, you can compare the effects of market volatilities on Dynamic Active and TD Active 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 Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Active and TD Active.

Diversification Opportunities for Dynamic Active and TD Active

0.85

Correlation Coefficient

Dynamic Active  TD Active

Very poor diversification

The 3 months correlation between Dynamic and TPRF is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Active Preferred and TD Active Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Preferred 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 Preferred are associated (or correlated) with TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Preferred has no effect on the direction of Dynamic Active i.e., Dynamic Active and TD Active go up and down completely randomly.

Pair Corralation between Dynamic Active and TD Active

Assuming the 90 days trading horizon Dynamic Active is expected to generate 1.1 times less return on investment than TD Active. In addition to that, Dynamic Active is 1.25 times more volatile than TD Active Preferred. It trades about 0.53 of its total potential returns per unit of risk. TD Active Preferred is currently generating about 0.73 per unit of volatility. If you would invest  1,052  in TD Active Preferred on April 21, 2025 and sell it today you would earn a total of  148.00  from holding TD Active Preferred or generate 14.07% return on investment over 90 days.

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

Dynamic Active Preferred  vs.  TD Active Preferred

Dynamic Active Preferred

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Preferred are ranked lower than 41 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dynamic Active may actually be approaching a critical reversion point that can send shares even higher in August 2025.

TD Active Preferred

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in TD Active Preferred are ranked lower than 57 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD Active displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynamic Active and TD Active

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

The idea behind Dynamic Active Preferred and TD Active Preferred 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.