Correlation Between TD Index and Brookfield

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

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

Diversification Opportunities for TD Index and Brookfield

0.56

Correlation Coefficient

TD Index  Brookfield

Very weak diversification

The 3 months correlation between 0P000071W8 and Brookfield is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and TD Index 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 Index Fund are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of TD Index i.e., TD Index and Brookfield go up and down completely randomly.

Pair Corralation between TD Index and Brookfield

Assuming the 90 days trading horizon TD Index Fund is expected to generate 1.28 times more return on investment than Brookfield. However, TD Index is 1.28 times more volatile than Brookfield. It trades about 0.2 of its potential returns per unit of risk. Brookfield is currently generating about 0.14 per unit of risk. If you would invest  13,539  in TD Index Fund on September 24, 2024 and sell it today you would earn a total of  1,422  from holding TD Index Fund or generate 10.5% return on investment over 90 days.

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

TD Index Fund  vs.  Brookfield

TD Index Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, TD Index may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brookfield

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TD Index and Brookfield

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

The idea behind TD Index Fund and Brookfield 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.