Correlation Between Tiaa-cref Small-cap and Western Asset

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

Diversification Opportunities for Tiaa-cref Small-cap and Western Asset

-0.59

Correlation Coefficient

Tiaa-cref Small-cap  Western Asset

Excellent diversification

The 3 months correlation between Tiaa-cref and Western is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Equity and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Total has no effect on the direction of Tiaa-cref Small-cap i.e., Tiaa-cref Small-cap and Western Asset go up and down completely randomly.

Pair Corralation between Tiaa-cref Small-cap and Western Asset

Assuming the 90 days horizon Tiaa Cref Small Cap Equity is expected to under-perform the Western Asset. In addition to that, Tiaa-cref Small-cap is 7.58 times more volatile than Western Asset Total. It trades about -0.08 of its total potential returns per unit of risk. Western Asset Total is currently generating about 0.31 per unit of volatility. If you would invest  893.00  in Western Asset Total on December 20, 2024 and sell it today you would earn a total of  28.00  from holding Western Asset Total or generate 3.14% return on investment over 90 days.

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

Tiaa Cref Small Cap Equity  vs.  Western Asset Total

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.

Western Asset Total

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Total are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset 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 Western Asset

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

The idea behind Tiaa Cref Small Cap Equity and Western Asset Total 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 Global Correlations module to find global opportunities by holding instruments from different markets.