Correlation Between TD One and TD Active

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

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

Diversification Opportunities for TD One and TD Active

0.97

Correlation Coefficient

TD One  TD Active

Almost no diversification

The 3 months correlation between TOCM and TUED is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding TD One Click Moderate and TD Active Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Active Enhanced and TD One 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 One Click Moderate are associated (or correlated) with TD Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Active Enhanced has no effect on the direction of TD One i.e., TD One and TD Active go up and down completely randomly.

Pair Corralation between TD One and TD Active

Assuming the 90 days trading horizon TD One is expected to generate 2.31 times less return on investment than TD Active. But when comparing it to its historical volatility, TD One Click Moderate is 2.31 times less risky than TD Active. It trades about 0.31 of its potential returns per unit of risk. TD Active Enhanced is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,645  in TD Active Enhanced on April 23, 2025 and sell it today you would earn a total of  479.00  from holding TD Active Enhanced or generate 18.11% return on investment over 90 days.

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

TD One Click Moderate  vs.  TD Active Enhanced

TD One Click

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD One Click Moderate are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD One may actually be approaching a critical reversion point that can send shares even higher in August 2025.

TD Active Enhanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Active Enhanced are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD Active displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TD One and TD Active

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

The idea behind TD One Click Moderate and TD Active Enhanced 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.