Correlation Between Tiaa-cref Inflation-linked and New Economy

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

By analyzing existing cross correlation between Tiaa Cref Inflation Linked Bond and New Economy Fund, you can compare the effects of market volatilities on Tiaa-cref Inflation-linked and New Economy 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 Tiaa-cref Inflation-linked with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tiaa-cref Inflation-linked and New Economy.

Diversification Opportunities for Tiaa-cref Inflation-linked and New Economy

-0.06

Correlation Coefficient

Tiaa-cref Inflation-linked  New Economy

Good diversification

The 3 months correlation between Tiaa-cref and New is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Inflation Linked Bon and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Tiaa-cref Inflation-linked 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 Tiaa Cref Inflation Linked Bond are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Tiaa-cref Inflation-linked i.e., Tiaa-cref Inflation-linked and New Economy go up and down completely randomly.

Pair Corralation between Tiaa-cref Inflation-linked and New Economy

Assuming the 90 days horizon Tiaa-cref Inflation-linked is expected to generate 7.73 times less return on investment than New Economy. But when comparing it to its historical volatility, Tiaa Cref Inflation Linked Bond is 3.45 times less risky than New Economy. It trades about 0.04 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,420  in New Economy Fund on October 10, 2024 and sell it today you would earn a total of  1,618  from holding New Economy Fund or generate 47.31% return on investment over 90 days.

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

Tiaa Cref Inflation Linked Bon  vs.  New Economy Fund

Tiaa-cref Inflation-linked

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiaa Cref Inflation Linked Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Tiaa-cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Economy Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Economy Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, New Economy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tiaa-cref Inflation-linked and New Economy

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

The idea behind Tiaa Cref Inflation Linked Bond and New Economy Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.