Correlation Between Vanguard Russell and TCW ETF

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

By analyzing existing cross correlation between Vanguard Russell 1000 and TCW ETF Trust, you can compare the effects of market volatilities on Vanguard Russell 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 Vanguard Russell with a short position of TCW ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and TCW ETF.

Diversification Opportunities for Vanguard Russell and TCW ETF

0.48

Correlation Coefficient

Vanguard Russell  TCW ETF

Very weak diversification

The 3 months correlation between Vanguard and TCW is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 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 Vanguard Russell 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 Vanguard Russell 1000 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 Vanguard Russell i.e., Vanguard Russell and TCW ETF go up and down completely randomly.

Pair Corralation between Vanguard Russell and TCW ETF

Given the investment horizon of 90 days Vanguard Russell 1000 is expected to under-perform the TCW ETF. In addition to that, Vanguard Russell is 1.54 times more volatile than TCW ETF Trust. It trades about -0.12 of its total potential returns per unit of risk. TCW ETF Trust is currently generating about 0.03 per unit of volatility. If you would invest  3,296  in TCW ETF Trust on December 28, 2024 and sell it today you would earn a total of  54.00  from holding TCW ETF Trust or generate 1.64% return on investment over 90 days.

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

Vanguard Russell 1000  vs.  TCW ETF Trust

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

TCW ETF Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TCW ETF Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TCW ETF is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard Russell and TCW ETF

The main advantage of trading using opposite Vanguard Russell and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell 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 Vanguard Russell 1000 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.