Correlation Between Vanguard Global and TD Active

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

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

Diversification Opportunities for Vanguard Global and TD Active

0.97

Correlation Coefficient

Vanguard Global  TD Active

Almost no diversification

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

Pair Corralation between Vanguard Global and TD Active

Assuming the 90 days trading horizon Vanguard Global is expected to generate 1.28 times less return on investment than TD Active. In addition to that, Vanguard Global is 1.01 times more volatile than TD Active Global. It trades about 0.16 of its total potential returns per unit of risk. TD Active Global is currently generating about 0.21 per unit of volatility. If you would invest  2,508  in TD Active Global on September 15, 2024 and sell it today you would earn a total of  276.00  from holding TD Active Global or generate 11.0% return on investment over 90 days.

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

Vanguard Global Value  vs.  TD Active Global

Vanguard Global Value

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Value are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TD Active Global

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TD Active Global are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, TD Active may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Global and TD Active

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

The idea behind Vanguard Global Value and TD Active 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.