Correlation Between TCW Transform and WisdomTree International

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

By analyzing existing cross correlation between TCW Transform Supply and WisdomTree International SmallCap, you can compare the effects of market volatilities on TCW Transform and WisdomTree International 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 Transform with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCW Transform and WisdomTree International.

Diversification Opportunities for TCW Transform and WisdomTree International

0.85

Correlation Coefficient

TCW Transform  WisdomTree International

Very poor diversification

The 3 months correlation between TCW and WisdomTree is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding TCW Transform Supply and WisdomTree International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and TCW Transform 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 Transform Supply are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of TCW Transform i.e., TCW Transform and WisdomTree International go up and down completely randomly.

Pair Corralation between TCW Transform and WisdomTree International

Given the investment horizon of 90 days TCW Transform Supply is expected to generate 1.17 times more return on investment than WisdomTree International. However, TCW Transform is 1.17 times more volatile than WisdomTree International SmallCap. It trades about 0.34 of its potential returns per unit of risk. WisdomTree International SmallCap is currently generating about 0.28 per unit of risk. If you would invest  5,989  in TCW Transform Supply on May 1, 2025 and sell it today you would earn a total of  1,105  from holding TCW Transform Supply or generate 18.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

TCW Transform Supply  vs.  WisdomTree International Small

TCW Transform Supply

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TCW Transform Supply are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, TCW Transform reported solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International SmallCap are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with TCW Transform and WisdomTree International

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

The idea behind TCW Transform Supply and WisdomTree International SmallCap 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.