Correlation Between Tcw Relative and Edgewood Growth

Can any of the company-specific risk be diversified away by investing in both Tcw Relative and Edgewood Growth 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 Relative and Edgewood Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tcw Relative Value and Edgewood Growth Fund, you can compare the effects of market volatilities on Tcw Relative and Edgewood Growth 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 Relative with a short position of Edgewood Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tcw Relative and Edgewood Growth.

Diversification Opportunities for Tcw Relative and Edgewood Growth

0.41

Correlation Coefficient

Tcw Relative  Edgewood Growth

Very weak diversification

The 3 months correlation between Tcw and Edgewood is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tcw Relative Value and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth and Tcw Relative 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 Relative Value are associated (or correlated) with Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of Tcw Relative i.e., Tcw Relative and Edgewood Growth go up and down completely randomly.

Pair Corralation between Tcw Relative and Edgewood Growth

Assuming the 90 days horizon Tcw Relative Value is expected to generate 0.67 times more return on investment than Edgewood Growth. However, Tcw Relative Value is 1.49 times less risky than Edgewood Growth. It trades about -0.1 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about -0.15 per unit of risk. If you would invest  2,303  in Tcw Relative Value on February 5, 2024 and sell it today you would lose (42.00) from holding Tcw Relative Value or give up 1.82% of portfolio value over 90 days.

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

Tcw Relative Value  vs.  Edgewood Growth Fund

Tcw Relative Value

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tcw Relative Value are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Tcw Relative may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Edgewood Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewood Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Edgewood Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tcw Relative and Edgewood Growth

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

The idea behind Tcw Relative Value and Edgewood Growth Fund 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.