Correlation Between TCW ETF and IShares JP

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

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

Diversification Opportunities for TCW ETF and IShares JP

-0.34

Correlation Coefficient

TCW ETF  IShares JP

Very good diversification

The 3 months correlation between TCW and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding TCW ETF Trust and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and TCW ETF 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 TCW ETF Trust are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of TCW ETF i.e., TCW ETF and IShares JP go up and down completely randomly.

Pair Corralation between TCW ETF and IShares JP

Given the investment horizon of 90 days TCW ETF Trust is expected to generate 0.15 times more return on investment than IShares JP. However, TCW ETF Trust is 6.58 times less risky than IShares JP. It trades about 1.04 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.1 per unit of risk. If you would invest  4,992  in TCW ETF Trust on September 12, 2024 and sell it today you would earn a total of  60.00  from holding TCW ETF Trust or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.23%
Values	Daily Returns

TCW ETF Trust  vs.  iShares JP Morgan

TCW ETF Trust

Risk-Adjusted Performance

81 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 81 (%) 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.

iShares JP Morgan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares JP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TCW ETF and IShares JP

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

The idea behind TCW ETF Trust and iShares JP Morgan 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.