Correlation Between Aqr Small and Tiaa-cref Growth

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

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

Diversification Opportunities for Aqr Small and Tiaa-cref Growth

0.94

Correlation Coefficient

Aqr Small  Tiaa-cref Growth

Almost no diversification

The 3 months correlation between Aqr and Tiaa-cref is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Tiaa Cref Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Growth and Aqr 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 Aqr Small Cap are associated (or correlated) with Tiaa-cref Growth. 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 Growth has no effect on the direction of Aqr Small i.e., Aqr Small and Tiaa-cref Growth go up and down completely randomly.

Pair Corralation between Aqr Small and Tiaa-cref Growth

Assuming the 90 days horizon Aqr Small Cap is expected to generate 1.17 times more return on investment than Tiaa-cref Growth. However, Aqr Small is 1.17 times more volatile than Tiaa Cref Growth Income. It trades about -0.07 of its potential returns per unit of risk. Tiaa Cref Growth Income is currently generating about -0.11 per unit of risk. If you would invest  1,744  in Aqr Small Cap on December 26, 2024 and sell it today you would lose (104.00) from holding Aqr Small Cap or give up 5.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Aqr Small Cap  vs.  Tiaa Cref Growth Income

Aqr Small Cap

Risk-Adjusted Performance

Very Weak

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

Tiaa Cref Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tiaa Cref Growth Income 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 Aqr Small and Tiaa-cref Growth

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

The idea behind Aqr Small Cap and Tiaa Cref Growth Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.