Correlation Between TD Canadian and Financial

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

By analyzing existing cross correlation between TD Canadian Long and Financial 15 Split, you can compare the effects of market volatilities on TD Canadian and Financial 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 TD Canadian with a short position of Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and Financial.

Diversification Opportunities for TD Canadian and Financial

-0.72

Correlation Coefficient

TD Canadian  Financial

Pay attention - limited upside

The 3 months correlation between TCLB and Financial is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Long and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split and TD 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 TD Canadian Long are associated (or correlated) with Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of TD Canadian i.e., TD Canadian and Financial go up and down completely randomly.

Pair Corralation between TD Canadian and Financial

Assuming the 90 days trading horizon TD Canadian Long is expected to under-perform the Financial. But the etf apears to be less risky and, when comparing its historical volatility, TD Canadian Long is 1.19 times less risky than Financial. The etf trades about -0.08 of its potential returns per unit of risk. The Financial 15 Split is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest  750.00  in Financial 15 Split on April 20, 2025 and sell it today you would earn a total of  242.00  from holding Financial 15 Split or generate 32.27% return on investment over 90 days.

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

TD Canadian Long  vs.  Financial 15 Split

TD Canadian Long

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Canadian Long has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Financial 15 Split

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 44 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Canadian and Financial

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

The idea behind TD Canadian Long and Financial 15 Split 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.