Correlation Between TD Active and Dynamic Active
Can any of the company-specific risk be diversified away by investing in both TD Active and Dynamic 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 Active and Dynamic Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TD Active Preferred and Dynamic Active Preferred, you can compare the effects of market volatilities on TD Active and Dynamic 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 Active with a short position of Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Active and Dynamic Active.
Diversification Opportunities for TD Active and Dynamic Active
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between TPRF and Dynamic is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding TD Active Preferred and Dynamic Active Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Preferred 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 Preferred are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Preferred has no effect on the direction of TD Active i.e., TD Active and Dynamic Active go up and down completely randomly.
Pair Corralation between TD Active and Dynamic Active
Assuming the 90 days trading horizon TD Active Preferred is expected to generate 0.86 times more return on investment than Dynamic Active. However, TD Active Preferred is 1.16 times less risky than Dynamic Active. It trades about 0.66 of its potential returns per unit of risk. Dynamic Active Preferred is currently generating about 0.51 per unit of risk. If you would invest 1,071 in TD Active Preferred on April 25, 2025 and sell it today you would earn a total of 131.00 from holding TD Active Preferred or generate 12.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
TD Active Preferred vs. Dynamic Active Preferred
Performance |
Timeline |
TD Active Preferred |
Dynamic Active Preferred |
TD Active and Dynamic Active Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TD Active and Dynamic Active
The main advantage of trading using opposite TD Active and Dynamic Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TD Active position performs unexpectedly, Dynamic 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 Dynamic Active will offset losses from the drop in Dynamic Active's long position.TD Active vs. TD Q Canadian | TD Active vs. TD Active Global | TD Active vs. TD Q Global | TD Active vs. TD Canadian Equity |
Dynamic Active vs. Dynamic Active Global | Dynamic Active vs. Dynamic Active Dividend | Dynamic Active vs. Dynamic Active Canadian | Dynamic Active vs. Global X Active |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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