Correlation Between TCW ETF and Large Cap

Can any of the company-specific risk be diversified away by investing in both TCW ETF and Large Cap 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 Large Cap 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 Large Cap E, you can compare the effects of market volatilities on TCW ETF and Large Cap 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 Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCW ETF and Large Cap.

Diversification Opportunities for TCW ETF and Large Cap

0.16

Correlation Coefficient

TCW ETF  Large Cap

Average diversification

The 3 months correlation between TCW and Large is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding TCW ETF Trust and Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap E 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap E has no effect on the direction of TCW ETF i.e., TCW ETF and Large Cap go up and down completely randomly.

Pair Corralation between TCW ETF and Large Cap

Given the investment horizon of 90 days TCW ETF Trust is expected to generate 0.2 times more return on investment than Large Cap. However, TCW ETF Trust is 4.96 times less risky than Large Cap. It trades about -0.04 of its potential returns per unit of risk. Large Cap E is currently generating about -0.27 per unit of risk. If you would invest  7,022  in TCW ETF Trust on September 24, 2024 and sell it today you would lose (58.00) from holding TCW ETF Trust or give up 0.83% of portfolio value over 90 days.

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

TCW ETF Trust  vs.  Large Cap E

TCW ETF Trust

Risk-Adjusted Performance

6 of 100

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.

Large Cap E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap E has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with TCW ETF and Large Cap

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

The idea behind TCW ETF Trust and Large Cap E 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.