Correlation Between Tiaa-cref Small-cap and Gmo Resources

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

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

Diversification Opportunities for Tiaa-cref Small-cap and Gmo Resources

0.5

Correlation Coefficient

Tiaa-cref Small-cap  Gmo Resources

Very weak diversification

The 3 months correlation between Tiaa-cref and Gmo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Blend and Gmo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Tiaa-cref Small-cap 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 Small Cap Blend are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Tiaa-cref Small-cap i.e., Tiaa-cref Small-cap and Gmo Resources go up and down completely randomly.

Pair Corralation between Tiaa-cref Small-cap and Gmo Resources

Assuming the 90 days horizon Tiaa Cref Small Cap Blend is expected to generate 1.23 times more return on investment than Gmo Resources. However, Tiaa-cref Small-cap is 1.23 times more volatile than Gmo Resources. It trades about -0.07 of its potential returns per unit of risk. Gmo Resources is currently generating about -0.15 per unit of risk. If you would invest  2,562  in Tiaa Cref Small Cap Blend on October 6, 2024 and sell it today you would lose (138.00) from holding Tiaa Cref Small Cap Blend or give up 5.39% of portfolio value over 90 days.

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

Tiaa Cref Small Cap Blend  vs.  Gmo Resources

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.

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources 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 basic 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.

Pair Trading with Tiaa-cref Small-cap and Gmo Resources

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

The idea behind Tiaa Cref Small Cap Blend and Gmo Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.