Correlation Between VanEck Vectors and TCW ETF

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

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

Diversification Opportunities for VanEck Vectors and TCW ETF

0.25

Correlation Coefficient

VanEck Vectors  TCW ETF

Modest diversification

The 3 months correlation between VanEck and TCW is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors Moodys 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 VanEck Vectors 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 VanEck Vectors Moodys 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 VanEck Vectors i.e., VanEck Vectors and TCW ETF go up and down completely randomly.

Pair Corralation between VanEck Vectors and TCW ETF

Given the investment horizon of 90 days VanEck Vectors Moodys is expected to under-perform the TCW ETF. In addition to that, VanEck Vectors is 2.91 times more volatile than TCW ETF Trust. It trades about -0.09 of its total potential returns per unit of risk. TCW ETF Trust is currently generating about 0.23 per unit of volatility. If you would invest  4,995  in TCW ETF Trust on September 16, 2024 and sell it today you would earn a total of  26.00  from holding TCW ETF Trust or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.77%
Values	Daily Returns

VanEck Vectors Moodys  vs.  TCW ETF Trust

VanEck Vectors Moodys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vectors Moodys has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, VanEck Vectors is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

TCW ETF Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, TCW ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VanEck Vectors and TCW ETF

The main advantage of trading using opposite VanEck Vectors and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Vectors 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 VanEck Vectors Moodys 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.