Correlation Between Tiaa-cref Small-cap and Royce Opportunity

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

Diversification Opportunities for Tiaa-cref Small-cap and Royce Opportunity

0.82

Correlation Coefficient

Tiaa-cref Small-cap  Royce Opportunity

Very poor diversification

The 3 months correlation between Tiaa-cref and Royce is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Equity and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity 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 Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Tiaa-cref Small-cap i.e., Tiaa-cref Small-cap and Royce Opportunity go up and down completely randomly.

Pair Corralation between Tiaa-cref Small-cap and Royce Opportunity

Assuming the 90 days horizon Tiaa Cref Small Cap Equity is expected to under-perform the Royce Opportunity. In addition to that, Tiaa-cref Small-cap is 1.06 times more volatile than Royce Opportunity Fund. It trades about -0.02 of its total potential returns per unit of risk. Royce Opportunity Fund is currently generating about 0.04 per unit of volatility. If you would invest  1,360  in Royce Opportunity Fund on October 25, 2024 and sell it today you would earn a total of  39.00  from holding Royce Opportunity Fund or generate 2.87% return on investment over 90 days.

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

Tiaa Cref Small Cap Equity  vs.  Royce Opportunity Fund

Tiaa-cref Small-cap

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, 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.

Royce Opportunity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Opportunity Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Royce Opportunity 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 Royce Opportunity

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

The idea behind Tiaa Cref Small Cap Equity and Royce Opportunity 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.