Correlation Between AGF American and TD Dividend

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

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

Diversification Opportunities for AGF American and TD Dividend

0.97

Correlation Coefficient

AGF American  TD Dividend

Almost no diversification

The 3 months correlation between AGF and 0P00016N6E is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding AGF American Growth and TD Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD Dividend Growth and AGF American 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 AGF American Growth are associated (or correlated) with TD Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD Dividend Growth has no effect on the direction of AGF American i.e., AGF American and TD Dividend go up and down completely randomly.

Pair Corralation between AGF American and TD Dividend

Assuming the 90 days trading horizon AGF American Growth is expected to generate 1.69 times more return on investment than TD Dividend. However, AGF American is 1.69 times more volatile than TD Dividend Growth. It trades about 0.37 of its potential returns per unit of risk. TD Dividend Growth is currently generating about 0.3 per unit of risk. If you would invest  5,996  in AGF American Growth on September 5, 2024 and sell it today you would earn a total of  1,325  from holding AGF American Growth or generate 22.1% return on investment over 90 days.

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

AGF American Growth  vs.  TD Dividend Growth

AGF American Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AGF American Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, AGF American sustained solid returns over the last few months and may actually be approaching a breakup point.

TD Dividend Growth

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Dividend Growth are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat conflicting basic indicators, TD Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AGF American and TD Dividend

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

The idea behind AGF American Growth and TD Dividend Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.