Correlation Between Tiaa-cref Small/mid-cap and International Growth

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

Diversification Opportunities for Tiaa-cref Small/mid-cap and International Growth

0.04

Correlation Coefficient

Tiaa-cref Small/mid-cap  International Growth

Significant diversification

The 3 months correlation between Tiaa-cref and International is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Smallmid Cap Equity and International Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Growth 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 International Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Growth has no effect on the direction of Tiaa-cref Small/mid-cap i.e., Tiaa-cref Small/mid-cap and International Growth go up and down completely randomly.

Pair Corralation between Tiaa-cref Small/mid-cap and International Growth

Assuming the 90 days horizon Tiaa Cref Smallmid Cap Equity is expected to under-perform the International Growth. In addition to that, Tiaa-cref Small/mid-cap is 1.21 times more volatile than International Growth Fund. It trades about -0.08 of its total potential returns per unit of risk. International Growth Fund is currently generating about 0.04 per unit of volatility. If you would invest  1,236  in International Growth Fund on December 30, 2024 and sell it today you would earn a total of  32.00  from holding International Growth Fund or generate 2.59% return on investment over 90 days.

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

Tiaa Cref Smallmid Cap Equity  vs.  International Growth Fund

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 fairly strong primary indicators, Tiaa-cref Small/mid-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Growth

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Growth Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, International Growth 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 International Growth

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

The idea behind Tiaa Cref Smallmid Cap Equity and International Growth 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.