Correlation Between TD Long and TD Canadian

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

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

Diversification Opportunities for TD Long and TD Canadian

0.64

Correlation Coefficient

TD Long  TD Canadian

Poor diversification

The 3 months correlation between TULB and TCLB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding TD Long Term and TD Canadian Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Canadian Long and TD Long 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 Long Term are associated (or correlated) with TD Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Canadian Long has no effect on the direction of TD Long i.e., TD Long and TD Canadian go up and down completely randomly.

Pair Corralation between TD Long and TD Canadian

Assuming the 90 days trading horizon TD Long Term is expected to generate 1.32 times more return on investment than TD Canadian. However, TD Long is 1.32 times more volatile than TD Canadian Long. It trades about -0.01 of its potential returns per unit of risk. TD Canadian Long is currently generating about -0.08 per unit of risk. If you would invest  10,716  in TD Long Term on April 21, 2025 and sell it today you would lose (87.00) from holding TD Long Term or give up 0.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TD Long Term  vs.  TD Canadian Long

TD Long Term

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Long Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD Canadian Long

Risk-Adjusted Performance

Very Weak

Over the last 90 days TD Canadian Long has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TD Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with TD Long and TD Canadian

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

The idea behind TD Long Term and TD Canadian Long 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.