Correlation Between TD Canadian and Dow Jones
Can any of the company-specific risk be diversified away by investing in both TD Canadian and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Canadian Aggregate and Dow Jones Industrial, you can compare the effects of market volatilities on TD Canadian and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Canadian and Dow Jones.
Diversification Opportunities for TD Canadian and Dow Jones
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TDB and Dow is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding TD Canadian Aggregate and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Aggregate are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of TD Canadian i.e., TD Canadian and Dow Jones go up and down completely randomly.
Pair Corralation between TD Canadian and Dow Jones
Assuming the 90 days trading horizon TD Canadian Aggregate is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, TD Canadian Aggregate is 2.63 times less risky than Dow Jones. The etf trades about -0.04 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,918,698 in Dow Jones Industrial on April 22, 2025 and sell it today you would earn a total of 513,609 from holding Dow Jones Industrial or generate 13.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
TD Canadian Aggregate vs. Dow Jones Industrial
Performance |
Timeline |
TD Canadian and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
TD Canadian Aggregate
Pair trading matchups for TD Canadian
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with TD Canadian and Dow Jones
The main advantage of trading using opposite TD Canadian and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Canadian position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.TD Canadian vs. TD International Equity | TD Canadian vs. TD Canadian Equity | TD Canadian vs. TD Equity Index | TD Canadian vs. TD Equity CAD |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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