Correlation Between Classic Value and Tiaa-cref Small-cap

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

By analyzing existing cross correlation between Classic Value Fund and Tiaa Cref Small Cap Blend, you can compare the effects of market volatilities on Classic Value and Tiaa-cref Small-cap 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 Classic Value with a short position of Tiaa-cref Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Classic Value and Tiaa-cref Small-cap.

Diversification Opportunities for Classic Value and Tiaa-cref Small-cap

0.65

Correlation Coefficient

Classic Value  Tiaa-cref Small-cap

Poor diversification

The 3 months correlation between Classic and Tiaa-cref is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value Fund and Tiaa Cref Small Cap Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa-cref Small-cap and Classic Value 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 Classic Value Fund are associated (or correlated) with Tiaa-cref Small-cap. 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 Small-cap has no effect on the direction of Classic Value i.e., Classic Value and Tiaa-cref Small-cap go up and down completely randomly.

Pair Corralation between Classic Value and Tiaa-cref Small-cap

Assuming the 90 days horizon Classic Value Fund is expected to under-perform the Tiaa-cref Small-cap. In addition to that, Classic Value is 1.34 times more volatile than Tiaa Cref Small Cap Blend. It trades about -0.02 of its total potential returns per unit of risk. Tiaa Cref Small Cap Blend is currently generating about 0.03 per unit of volatility. If you would invest  2,024  in Tiaa Cref Small Cap Blend on October 10, 2024 and sell it today you would earn a total of  375.00  from holding Tiaa Cref Small Cap Blend or generate 18.53% return on investment over 90 days.

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

Classic Value Fund  vs.  Tiaa Cref Small Cap Blend

Classic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Classic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Tiaa-cref Small-cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiaa Cref Small Cap Blend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Tiaa-cref Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Classic Value and Tiaa-cref Small-cap

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

The idea behind Classic Value Fund and Tiaa Cref Small Cap Blend 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.