Correlation Between Tiaa-cref High-yield and Laudus Large

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

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

Diversification Opportunities for Tiaa-cref High-yield and Laudus Large

0.69

Correlation Coefficient

Tiaa-cref High-yield  Laudus Large

Poor diversification

The 3 months correlation between Tiaa-cref and Laudus is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref High Yield Fund and Laudus Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laudus Large Cap and Tiaa-cref High-yield 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 High Yield Fund are associated (or correlated) with Laudus Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laudus Large Cap has no effect on the direction of Tiaa-cref High-yield i.e., Tiaa-cref High-yield and Laudus Large go up and down completely randomly.

Pair Corralation between Tiaa-cref High-yield and Laudus Large

Assuming the 90 days horizon Tiaa Cref High Yield Fund is expected to generate 0.09 times more return on investment than Laudus Large. However, Tiaa Cref High Yield Fund is 11.15 times less risky than Laudus Large. It trades about -0.31 of its potential returns per unit of risk. Laudus Large Cap is currently generating about -0.25 per unit of risk. If you would invest  894.00  in Tiaa Cref High Yield Fund on October 12, 2024 and sell it today you would lose (10.00) from holding Tiaa Cref High Yield Fund or give up 1.12% of portfolio value over 90 days.

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

Tiaa Cref High Yield Fund  vs.  Laudus Large Cap

Tiaa-cref High-yield

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref High Yield Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tiaa-cref High-yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Laudus Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laudus Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Laudus Large 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 High-yield and Laudus Large

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

The idea behind Tiaa Cref High Yield Fund and Laudus Large Cap 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.