Correlation Between TD Active and Vanguard FTSE

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

By analyzing existing cross correlation between TD Active Global and Vanguard FTSE Canada, you can compare the effects of market volatilities on TD Active and Vanguard FTSE 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 Active with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Active and Vanguard FTSE.

Diversification Opportunities for TD Active and Vanguard FTSE

0.92

Correlation Coefficient

TD Active  Vanguard FTSE

Almost no diversification

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

Pair Corralation between TD Active and Vanguard FTSE

Assuming the 90 days trading horizon TD Active is expected to generate 1.27 times less return on investment than Vanguard FTSE. In addition to that, TD Active is 1.95 times more volatile than Vanguard FTSE Canada. It trades about 0.17 of its total potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.42 per unit of volatility. If you would invest  5,037  in Vanguard FTSE Canada on April 24, 2025 and sell it today you would earn a total of  552.00  from holding Vanguard FTSE Canada or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

TD Active Global  vs.  Vanguard FTSE Canada

TD Active Global

Risk-Adjusted Performance

Good

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

Vanguard FTSE Canada

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Canada are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with TD Active and Vanguard FTSE

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

The idea behind TD Active Global and Vanguard FTSE Canada 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.