Correlation Between Tiaa-cref Small/mid-cap and Federated Kaufmann

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

Diversification Opportunities for Tiaa-cref Small/mid-cap and Federated Kaufmann

0.97

Correlation Coefficient

Tiaa-cref Small/mid-cap  Federated Kaufmann

Almost no diversification

The 3 months correlation between Tiaa-cref and Federated is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Smallmid Cap Equity and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large 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 Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Tiaa-cref Small/mid-cap i.e., Tiaa-cref Small/mid-cap and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Tiaa-cref Small/mid-cap and Federated Kaufmann

Assuming the 90 days horizon Tiaa Cref Smallmid Cap Equity is expected to generate 0.86 times more return on investment than Federated Kaufmann. However, Tiaa Cref Smallmid Cap Equity is 1.16 times less risky than Federated Kaufmann. It trades about -0.08 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about -0.11 per unit of risk. If you would invest  1,493  in Tiaa Cref Smallmid Cap Equity on December 24, 2024 and sell it today you would lose (93.00) from holding Tiaa Cref Smallmid Cap Equity or give up 6.23% of portfolio value over 90 days.

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

Tiaa Cref Smallmid Cap Equity  vs.  Federated Kaufmann Large

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 basic 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.

Federated Kaufmann Large

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tiaa-cref Small/mid-cap and Federated Kaufmann

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

The idea behind Tiaa Cref Smallmid Cap Equity and Federated Kaufmann Large 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.