Correlation Between Northern Small and Tiaa-cref Small/mid-cap

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

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

Diversification Opportunities for Northern Small and Tiaa-cref Small/mid-cap

0.82

Correlation Coefficient

Northern Small  Tiaa-cref Small/mid-cap

Very poor diversification

The 3 months correlation between Northern and Tiaa-cref is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Tiaa Cref Smallmid Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa-cref Small/mid-cap and Northern Small 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 Northern Small Cap are associated (or correlated) with Tiaa-cref Small/mid-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/mid-cap has no effect on the direction of Northern Small i.e., Northern Small and Tiaa-cref Small/mid-cap go up and down completely randomly.

Pair Corralation between Northern Small and Tiaa-cref Small/mid-cap

Assuming the 90 days horizon Northern Small Cap is expected to under-perform the Tiaa-cref Small/mid-cap. In addition to that, Northern Small is 1.63 times more volatile than Tiaa Cref Smallmid Cap Equity. It trades about -0.3 of its total potential returns per unit of risk. Tiaa Cref Smallmid Cap Equity is currently generating about -0.18 per unit of volatility. If you would invest  1,560  in Tiaa Cref Smallmid Cap Equity on October 9, 2024 and sell it today you would lose (65.00) from holding Tiaa Cref Smallmid Cap Equity or give up 4.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Northern Small Cap  vs.  Tiaa Cref Smallmid Cap Equity

Northern Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tiaa-cref Small/mid-cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiaa Cref Smallmid Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Northern Small and Tiaa-cref Small/mid-cap

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

The idea behind Northern Small Cap and Tiaa Cref Smallmid Cap Equity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.