Correlation Between IShares Treasury and TCW ETF

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

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

Diversification Opportunities for IShares Treasury and TCW ETF

0.7

Correlation Coefficient

IShares Treasury  TCW ETF

Poor diversification

The 3 months correlation between IShares and TCW is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating 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 IShares Treasury 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 Treasury Floating 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 IShares Treasury i.e., IShares Treasury and TCW ETF go up and down completely randomly.

Pair Corralation between IShares Treasury and TCW ETF

Given the investment horizon of 90 days iShares Treasury Floating is expected to generate 0.4 times more return on investment than TCW ETF. However, iShares Treasury Floating is 2.51 times less risky than TCW ETF. It trades about 0.9 of its potential returns per unit of risk. TCW ETF Trust is currently generating about 0.33 per unit of risk. If you would invest  5,010  in iShares Treasury Floating on December 27, 2024 and sell it today you would earn a total of  54.00  from holding iShares Treasury Floating or generate 1.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

iShares Treasury Floating  vs.  TCW ETF Trust

iShares Treasury Floating

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 70 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

TCW ETF Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 25 (%) 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 IShares Treasury and TCW ETF

The main advantage of trading using opposite IShares Treasury and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Treasury 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 iShares Treasury Floating 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.