Correlation Between GM and Tiaa Cref

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

By analyzing existing cross correlation between General Motors and Tiaa Cref Large Cap Growth, you can compare the effects of market volatilities on GM and Tiaa Cref 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 GM with a short position of Tiaa Cref. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tiaa Cref.

Diversification Opportunities for GM and Tiaa Cref

0.71

Correlation Coefficient

GM  Tiaa Cref

Poor diversification

The 3 months correlation between GM and Tiaa is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tiaa Cref Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Large and GM 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 General Motors are associated (or correlated) with Tiaa Cref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa Cref Large has no effect on the direction of GM i.e., GM and Tiaa Cref go up and down completely randomly.

Pair Corralation between GM and Tiaa Cref

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Tiaa Cref. In addition to that, GM is 1.05 times more volatile than Tiaa Cref Large Cap Growth. It trades about -0.12 of its total potential returns per unit of risk. Tiaa Cref Large Cap Growth is currently generating about 0.09 per unit of volatility. If you would invest  6,775  in Tiaa Cref Large Cap Growth on September 28, 2024 and sell it today you would earn a total of  152.00  from holding Tiaa Cref Large Cap Growth or generate 2.24% return on investment over 90 days.

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

General Motors  vs.  Tiaa Cref Large Cap Growth

General Motors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Tiaa Cref Large

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Large Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Tiaa Cref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Tiaa Cref

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

The idea behind General Motors and Tiaa Cref Large Cap Growth 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.