Correlation Between Exxon and TCW ETF
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and TCW ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and TCW ETF Trust, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of TCW ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and TCW ETF.
Diversification Opportunities for Exxon and TCW ETF
Poor diversification
The 3 months correlation between Exxon and TCW is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and TCW ETF go up and down completely randomly.
Pair Corralation between Exxon and TCW ETF
Considering the 90-day investment horizon Exxon is expected to generate 1.34 times less return on investment than TCW ETF. In addition to that, Exxon is 1.13 times more volatile than TCW ETF Trust. It trades about 0.04 of its total potential returns per unit of risk. TCW ETF Trust is currently generating about 0.05 per unit of volatility. If you would invest 6,397 in TCW ETF Trust on September 1, 2024 and sell it today you would earn a total of 453.00 from holding TCW ETF Trust or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Exxon Mobil Corp vs. TCW ETF Trust
Performance |
| Timeline |
| Exxon Mobil Corp |
| TCW ETF Trust |
Exxon and TCW ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and TCW ETF
The main advantage of trading using opposite Exxon and TCW ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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.| TCW ETF vs. ProShares Supply Chain | TCW ETF vs. JPMorgan Climate Change | TCW ETF vs. Rbb Fund | TCW ETF vs. Simplify Propel Opportunities |
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.
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