Correlation Between Tiaa-cref Small-cap and Equity Growth

Can any of the company-specific risk be diversified away by investing in both Tiaa-cref Small-cap and Equity 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 Tiaa-cref Small-cap and Equity Growth 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 The Equity Growth, you can compare the effects of market volatilities on Tiaa-cref Small-cap and Equity 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 Tiaa-cref Small-cap with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tiaa-cref Small-cap and Equity Growth.

Diversification Opportunities for Tiaa-cref Small-cap and Equity Growth

0.21

Correlation Coefficient

Tiaa-cref Small-cap  Equity Growth

Modest diversification

The 3 months correlation between Tiaa-cref and Equity is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Blend and The Equity Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Tiaa-cref Small-cap i.e., Tiaa-cref Small-cap and Equity Growth go up and down completely randomly.

Pair Corralation between Tiaa-cref Small-cap and Equity Growth

Assuming the 90 days horizon Tiaa Cref Small Cap Blend is expected to under-perform the Equity Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Tiaa Cref Small Cap Blend is 1.41 times less risky than Equity Growth. The mutual fund trades about -0.23 of its potential returns per unit of risk. The The Equity Growth is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,831  in The Equity Growth on October 11, 2024 and sell it today you would lose (90.00) from holding The Equity Growth or give up 3.18% of portfolio value over 90 days.

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

Tiaa Cref Small Cap Blend  vs.  The Equity Growth

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.

Equity Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Equity Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Equity Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tiaa-cref Small-cap and Equity Growth

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

The idea behind Tiaa Cref Small Cap Blend and The Equity Growth 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.