Correlation Between Small Cap and Tiaa Cref

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

By analyzing existing cross correlation between Small Cap Index and Tiaa Cref Inflation Linked Bond, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Tiaa Cref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Tiaa Cref.

Diversification Opportunities for Small Cap and Tiaa Cref

-0.04

Correlation Coefficient

Small Cap  Tiaa Cref

Good diversification

The 3 months correlation between Small and Tiaa is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Index and Tiaa Cref Inflation Linked Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Inflation and 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 Small Cap Index 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 Inflation has no effect on the direction of Small Cap i.e., Small Cap and Tiaa Cref go up and down completely randomly.

Pair Corralation between Small Cap and Tiaa Cref

Assuming the 90 days horizon Small Cap Index is expected to generate 4.99 times more return on investment than Tiaa Cref. However, Small Cap is 4.99 times more volatile than Tiaa Cref Inflation Linked Bond. It trades about 0.04 of its potential returns per unit of risk. Tiaa Cref Inflation Linked Bond is currently generating about 0.07 per unit of risk. If you would invest  1,259  in Small Cap Index on December 2, 2024 and sell it today you would earn a total of  336.00  from holding Small Cap Index or generate 26.69% return on investment over 90 days.

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

Small Cap Index  vs.  Tiaa Cref Inflation Linked Bon

Small Cap Index

Risk-Adjusted Performance

Very Weak

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

Tiaa Cref Inflation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Inflation Linked Bond are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Tiaa Cref is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Tiaa Cref

The main advantage of trading using opposite Small Cap and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 Small Cap Index and Tiaa Cref Inflation Linked Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.