Correlation Between Tiaa-cref Small/mid-cap and Lgm Risk

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

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

Diversification Opportunities for Tiaa-cref Small/mid-cap and Lgm Risk

0.91

Correlation Coefficient

Tiaa-cref Small/mid-cap  Lgm Risk

Almost no diversification

The 3 months correlation between Tiaa-cref and Lgm is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Smallmid Cap Equity and Lgm Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lgm Risk Managed and Tiaa-cref Small/mid-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 Smallmid Cap Equity are associated (or correlated) with Lgm Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lgm Risk Managed has no effect on the direction of Tiaa-cref Small/mid-cap i.e., Tiaa-cref Small/mid-cap and Lgm Risk go up and down completely randomly.

Pair Corralation between Tiaa-cref Small/mid-cap and Lgm Risk

Assuming the 90 days horizon Tiaa Cref Smallmid Cap Equity is expected to under-perform the Lgm Risk. In addition to that, Tiaa-cref Small/mid-cap is 3.41 times more volatile than Lgm Risk Managed. It trades about -0.08 of its total potential returns per unit of risk. Lgm Risk Managed is currently generating about -0.05 per unit of volatility. If you would invest  1,140  in Lgm Risk Managed on December 24, 2024 and sell it today you would lose (14.00) from holding Lgm Risk Managed or give up 1.23% of portfolio value over 90 days.

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

Tiaa Cref Smallmid Cap Equity  vs.  Lgm Risk Managed

Tiaa-cref Small/mid-cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tiaa Cref Smallmid Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Lgm Risk Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lgm Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lgm Risk 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 Small/mid-cap and Lgm Risk

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

The idea behind Tiaa Cref Smallmid Cap Equity and Lgm Risk Managed 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.