Correlation Between Tiaa-cref High-yield and Fam Small
Can any of the company-specific risk be diversified away by investing in both Tiaa-cref High-yield and Fam Small 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 High-yield and Fam Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tiaa Cref High Yield Fund and Fam Small Cap, you can compare the effects of market volatilities on Tiaa-cref High-yield and Fam Small 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 High-yield with a short position of Fam Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tiaa-cref High-yield and Fam Small.
Diversification Opportunities for Tiaa-cref High-yield and Fam Small
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tiaa-cref and Fam is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref High Yield Fund and Fam Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Small Cap and Tiaa-cref High-yield 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 High Yield Fund are associated (or correlated) with Fam Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Small Cap has no effect on the direction of Tiaa-cref High-yield i.e., Tiaa-cref High-yield and Fam Small go up and down completely randomly.
Pair Corralation between Tiaa-cref High-yield and Fam Small
Assuming the 90 days horizon Tiaa-cref High-yield is expected to generate 2.65 times less return on investment than Fam Small. But when comparing it to its historical volatility, Tiaa Cref High Yield Fund is 5.23 times less risky than Fam Small. It trades about 0.18 of its potential returns per unit of risk. Fam Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Fam Small Cap on September 1, 2024 and sell it today you would earn a total of 488.00 from holding Fam Small Cap or generate 19.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tiaa Cref High Yield Fund vs. Fam Small Cap
Performance |
| Timeline |
| Tiaa-cref High-yield |
| Fam Small Cap |
Tiaa-cref High-yield and Fam Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tiaa-cref High-yield and Fam Small
The main advantage of trading using opposite Tiaa-cref High-yield and Fam Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tiaa-cref High-yield position performs unexpectedly, Fam Small 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 Fam Small will offset losses from the drop in Fam Small's long position.The idea behind Tiaa Cref High Yield Fund and Fam Small Cap 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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