Correlation Between TD Index and Russell Investments

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

By analyzing existing cross correlation between TD Index Fund E and Russell Investments Global, you can compare the effects of market volatilities on TD Index and Russell Investments 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 Russell Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of TD Index and Russell Investments.

Diversification Opportunities for TD Index and Russell Investments

0.85

Correlation Coefficient

TD Index  Russell Investments

Very poor diversification

The 3 months correlation between TDB902 and Russell is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding TD Index Fund E and Russell Investments Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell Investments 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 E are associated (or correlated) with Russell Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell Investments has no effect on the direction of TD Index i.e., TD Index and Russell Investments go up and down completely randomly.

Pair Corralation between TD Index and Russell Investments

Assuming the 90 days trading horizon TD Index Fund E is expected to generate 1.34 times more return on investment than Russell Investments. However, TD Index is 1.34 times more volatile than Russell Investments Global. It trades about 0.32 of its potential returns per unit of risk. Russell Investments Global is currently generating about 0.2 per unit of risk. If you would invest  13,049  in TD Index Fund E on September 5, 2024 and sell it today you would earn a total of  2,037  from holding TD Index Fund E or generate 15.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

TD Index Fund E  vs.  Russell Investments Global

TD Index Fund

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Index Fund E are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental drivers, TD Index sustained solid returns over the last few months and may actually be approaching a breakup point.

Russell Investments

Risk-Adjusted Performance

15 of 100

Solid

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

Pair Trading with TD Index and Russell Investments

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

The idea behind TD Index Fund E and Russell Investments Global 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.