Correlation Between TD Canadian and BetaPro SP

Can any of the company-specific risk be diversified away by investing in both TD Canadian and BetaPro SP 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 BetaPro SP 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 BetaPro SP 500, you can compare the effects of market volatilities on TD Canadian and BetaPro SP 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 BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and BetaPro SP.

Diversification Opportunities for TD Canadian and BetaPro SP

-0.68

Correlation Coefficient

TD Canadian  BetaPro SP

Excellent diversification

The 3 months correlation between TCLB and BetaPro is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Long and BetaPro SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP 500 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 BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP 500 has no effect on the direction of TD Canadian i.e., TD Canadian and BetaPro SP go up and down completely randomly.

Pair Corralation between TD Canadian and BetaPro SP

Assuming the 90 days trading horizon TD Canadian Long is expected to under-perform the BetaPro SP. But the etf apears to be less risky and, when comparing its historical volatility, TD Canadian Long is 1.32 times less risky than BetaPro SP. The etf trades about -0.22 of its potential returns per unit of risk. The BetaPro SP 500 is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  2,485  in BetaPro SP 500 on April 21, 2025 and sell it today you would earn a total of  263.00  from holding BetaPro SP 500 or generate 10.58% 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.  BetaPro SP 500

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.

BetaPro SP 500

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro SP 500 are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro SP displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Canadian and BetaPro SP

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

The idea behind TD Canadian Long and BetaPro SP 500 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.