Correlation Between Columbia ETF and TCW ETF

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

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

Diversification Opportunities for Columbia ETF and TCW ETF

0.83

Correlation Coefficient

Columbia ETF  TCW ETF

Very poor diversification

The 3 months correlation between Columbia and TCW is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Columbia ETF Trust 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 Columbia 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 Columbia ETF Trust 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 Columbia ETF i.e., Columbia ETF and TCW ETF go up and down completely randomly.

Pair Corralation between Columbia ETF and TCW ETF

Given the investment horizon of 90 days Columbia ETF is expected to generate 1.43 times less return on investment than TCW ETF. But when comparing it to its historical volatility, Columbia ETF Trust is 1.36 times less risky than TCW ETF. It trades about 0.08 of its potential returns per unit of risk. TCW ETF Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,927  in TCW ETF Trust on December 28, 2024 and sell it today you would earn a total of  79.00  from holding TCW ETF Trust or generate 1.6% return on investment over 90 days.

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

Columbia ETF Trust  vs.  TCW ETF Trust

Columbia ETF Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Columbia ETF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

TCW ETF Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 6 (%) 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 Columbia ETF and TCW ETF

The main advantage of trading using opposite Columbia ETF and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia ETF 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 Columbia ETF Trust 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.