Correlation Between TCW ETF and ProShares Short

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

Diversification Opportunities for TCW ETF and ProShares Short

-0.9

Correlation Coefficient

TCW ETF  ProShares Short

Pay attention - limited upside

The 3 months correlation between TCW and ProShares is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding TCW ETF Trust and ProShares Short High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short High 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short High has no effect on the direction of TCW ETF i.e., TCW ETF and ProShares Short go up and down completely randomly.

Pair Corralation between TCW ETF and ProShares Short

Given the investment horizon of 90 days TCW ETF Trust is expected to under-perform the ProShares Short. But the etf apears to be less risky and, when comparing its historical volatility, TCW ETF Trust is 1.24 times less risky than ProShares Short. The etf trades about 0.0 of its potential returns per unit of risk. The ProShares Short High is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,594  in ProShares Short High on February 3, 2025 and sell it today you would earn a total of  13.00  from holding ProShares Short High or generate 0.82% return on investment over 90 days.

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

TCW ETF Trust  vs.  ProShares Short High

TCW ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCW ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ProShares Short High

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, ProShares Short 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 ETF and ProShares Short

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

The idea behind TCW ETF Trust and ProShares Short High 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.