Correlation Between Tiaa-cref Small-cap and Fulcrum Diversified

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

Diversification Opportunities for Tiaa-cref Small-cap and Fulcrum Diversified

0.6

Correlation Coefficient

Tiaa-cref Small-cap  Fulcrum Diversified

Poor diversification

The 3 months correlation between Tiaa-cref and Fulcrum is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Equity and Fulcrum Diversified Absolute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Diversified 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 Equity are associated (or correlated) with Fulcrum Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Diversified has no effect on the direction of Tiaa-cref Small-cap i.e., Tiaa-cref Small-cap and Fulcrum Diversified go up and down completely randomly.

Pair Corralation between Tiaa-cref Small-cap and Fulcrum Diversified

Assuming the 90 days horizon Tiaa Cref Small Cap Equity is expected to under-perform the Fulcrum Diversified. In addition to that, Tiaa-cref Small-cap is 3.52 times more volatile than Fulcrum Diversified Absolute. It trades about -0.09 of its total potential returns per unit of risk. Fulcrum Diversified Absolute is currently generating about -0.02 per unit of volatility. If you would invest  933.00  in Fulcrum Diversified Absolute on December 20, 2024 and sell it today you would lose (4.00) from holding Fulcrum Diversified Absolute or give up 0.43% of portfolio value over 90 days.

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

Tiaa Cref Small Cap Equity  vs.  Fulcrum Diversified Absolute

Tiaa-cref Small-cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tiaa Cref Small Cap Equity 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.

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified 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-cap and Fulcrum Diversified

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

The idea behind Tiaa Cref Small Cap Equity and Fulcrum Diversified Absolute 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.