Correlation Between Sustainable Equity and TCW ETF

Can any of the company-specific risk be diversified away by investing in both Sustainable Equity and TCW ETF 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 Sustainable Equity and TCW ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sustainable Equity Fund and TCW ETF Trust, you can compare the effects of market volatilities on Sustainable Equity and TCW ETF 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 Sustainable Equity with a short position of TCW ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sustainable Equity and TCW ETF.

Diversification Opportunities for Sustainable Equity and TCW ETF

0.66

Correlation Coefficient

Sustainable Equity  TCW ETF

Poor diversification

The 3 months correlation between Sustainable and TCW is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sustainable Equity Fund and TCW ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCW ETF Trust and Sustainable Equity 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 Sustainable Equity Fund are associated (or correlated) with TCW ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCW ETF Trust has no effect on the direction of Sustainable Equity i.e., Sustainable Equity and TCW ETF go up and down completely randomly.

Pair Corralation between Sustainable Equity and TCW ETF

Assuming the 90 days horizon Sustainable Equity Fund is expected to under-perform the TCW ETF. In addition to that, Sustainable Equity is 1.91 times more volatile than TCW ETF Trust. It trades about -0.21 of its total potential returns per unit of risk. TCW ETF Trust is currently generating about -0.02 per unit of volatility. If you would invest  7,022  in TCW ETF Trust on September 25, 2024 and sell it today you would lose (36.00) from holding TCW ETF Trust or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Sustainable Equity Fund  vs.  TCW ETF Trust

Sustainable Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sustainable Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Sustainable Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TCW ETF Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TCW ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sustainable Equity and TCW ETF

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

The idea behind Sustainable Equity Fund and TCW ETF Trust 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.