Correlation Between Visa and Tiaa Cref

Can any of the company-specific risk be diversified away by investing in both Visa and Tiaa Cref 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 Visa and Tiaa Cref into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Visa Class A and Tiaa Cref Sp 500, you can compare the effects of market volatilities on Visa and Tiaa Cref 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 Visa with a short position of Tiaa Cref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Tiaa Cref.

Diversification Opportunities for Visa and Tiaa Cref

0.81

Correlation Coefficient

Visa  Tiaa Cref

Very poor diversification

The 3 months correlation between Visa and Tiaa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Tiaa Cref Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Sp and Visa 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 Visa Class A are associated (or correlated) with Tiaa Cref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa Cref Sp has no effect on the direction of Visa i.e., Visa and Tiaa Cref go up and down completely randomly.

Pair Corralation between Visa and Tiaa Cref

Taking into account the 90-day investment horizon Visa is expected to generate 1.06 times less return on investment than Tiaa Cref. In addition to that, Visa is 1.24 times more volatile than Tiaa Cref Sp 500. It trades about 0.09 of its total potential returns per unit of risk. Tiaa Cref Sp 500 is currently generating about 0.12 per unit of volatility. If you would invest  4,063  in Tiaa Cref Sp 500 on September 18, 2024 and sell it today you would earn a total of  2,527  from holding Tiaa Cref Sp 500 or generate 62.2% return on investment over 90 days.

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

Visa Class A  vs.  Tiaa Cref Sp 500

Visa Class A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tiaa Cref Sp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Sp 500 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tiaa Cref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Visa and Tiaa Cref

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

The idea behind Visa Class A and Tiaa Cref Sp 500 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.