Correlation Between Desjardins Melodia and TD Comfort

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

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

Diversification Opportunities for Desjardins Melodia and TD Comfort

0.67

Correlation Coefficient

Desjardins Melodia  TD Comfort

Poor diversification

The 3 months correlation between Desjardins and 0P0001FAU8 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins Melodia Balanced and TD Comfort Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Comfort Balanced and Desjardins Melodia 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 Desjardins Melodia Balanced are associated (or correlated) with TD Comfort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Comfort Balanced has no effect on the direction of Desjardins Melodia i.e., Desjardins Melodia and TD Comfort go up and down completely randomly.

Pair Corralation between Desjardins Melodia and TD Comfort

Assuming the 90 days trading horizon Desjardins Melodia Balanced is expected to generate 1.19 times more return on investment than TD Comfort. However, Desjardins Melodia is 1.19 times more volatile than TD Comfort Balanced. It trades about 0.26 of its potential returns per unit of risk. TD Comfort Balanced is currently generating about 0.21 per unit of risk. If you would invest  1,349  in Desjardins Melodia Balanced on September 3, 2024 and sell it today you would earn a total of  84.00  from holding Desjardins Melodia Balanced or generate 6.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Desjardins Melodia Balanced  vs.  TD Comfort Balanced

Desjardins Melodia

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins Melodia Balanced are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Desjardins Melodia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TD Comfort Balanced

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Comfort Balanced are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable technical and fundamental indicators, TD Comfort is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Desjardins Melodia and TD Comfort

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

The idea behind Desjardins Melodia Balanced and TD Comfort Balanced 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.