Correlation Between TD Active and TD Q

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

Diversification Opportunities for TD Active and TD Q

0.43

Correlation Coefficient

TD Active  TD Q

Very weak diversification

The 3 months correlation between TGRE and TQSM is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding TD Active Global and TD Q Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Q Small 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 TD Q. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Q Small has no effect on the direction of TD Active i.e., TD Active and TD Q go up and down completely randomly.

Pair Corralation between TD Active and TD Q

Assuming the 90 days trading horizon TD Active is expected to generate 1.14 times less return on investment than TD Q. But when comparing it to its historical volatility, TD Active Global is 1.16 times less risky than TD Q. It trades about 0.05 of its potential returns per unit of risk. TD Q Small Mid Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,923  in TD Q Small Mid Cap on April 20, 2025 and sell it today you would earn a total of  507.00  from holding TD Q Small Mid Cap or generate 26.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.36%
Values	Daily Returns

TD Active Global  vs.  TD Q Small Mid Cap

TD Active Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TD Active Global are ranked lower than 8 (%) 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.

TD Q Small

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Q Small Mid Cap are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, TD Q displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD Active and TD Q

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

The idea behind TD Active Global and TD Q Small Mid Cap 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.