Correlation Between Simplify Exchange and TCW ETF

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

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

Diversification Opportunities for Simplify Exchange and TCW ETF

-0.7

Correlation Coefficient

Simplify Exchange  TCW ETF

Excellent diversification

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

Pair Corralation between Simplify Exchange and TCW ETF

Considering the 90-day investment horizon Simplify Exchange Traded is expected to under-perform the TCW ETF. But the etf apears to be less risky and, when comparing its historical volatility, Simplify Exchange Traded is 1.89 times less risky than TCW ETF. The etf trades about -0.23 of its potential returns per unit of risk. The TCW ETF Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,439  in TCW ETF Trust on September 16, 2024 and sell it today you would earn a total of  209.00  from holding TCW ETF Trust or generate 3.25% return on investment over 90 days.

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

Simplify Exchange Traded  vs.  TCW ETF Trust

Simplify Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

TCW ETF Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, TCW ETF is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Simplify Exchange and TCW ETF

The main advantage of trading using opposite Simplify Exchange and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Exchange 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 Simplify Exchange Traded 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.