Correlation Between IShares Core and TD International

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

By analyzing existing cross correlation between iShares Core MSCI and TD International Equity, you can compare the effects of market volatilities on IShares Core and TD International 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 IShares Core with a short position of TD International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and TD International.

Diversification Opportunities for IShares Core and TD International

0.75

Correlation Coefficient

IShares Core  TD International

Poor diversification

The 3 months correlation between IShares and TPE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and TD International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TD International Equity and IShares Core 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 iShares Core MSCI are associated (or correlated) with TD International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TD International Equity has no effect on the direction of IShares Core i.e., IShares Core and TD International go up and down completely randomly.

Pair Corralation between IShares Core and TD International

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 0.88 times more return on investment than TD International. However, iShares Core MSCI is 1.13 times less risky than TD International. It trades about 0.07 of its potential returns per unit of risk. TD International Equity is currently generating about 0.02 per unit of risk. If you would invest  3,174  in iShares Core MSCI on September 14, 2024 and sell it today you would earn a total of  89.00  from holding iShares Core MSCI or generate 2.8% return on investment over 90 days.

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

iShares Core MSCI  vs.  TD International Equity

iShares Core MSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TD International Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TD International Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, TD International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and TD International

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

The idea behind iShares Core MSCI and TD International Equity 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.