Correlation Between Target Retirement and Tiaa-cref Lifecycle
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Tiaa-cref Lifecycle 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 Target Retirement and Tiaa-cref Lifecycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and Tiaa Cref Lifecycle Index, you can compare the effects of market volatilities on Target Retirement and Tiaa-cref Lifecycle 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 Target Retirement with a short position of Tiaa-cref Lifecycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Tiaa-cref Lifecycle.
Diversification Opportunities for Target Retirement and Tiaa-cref Lifecycle
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Target and Tiaa-cref is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and Tiaa Cref Lifecycle Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Lifecycle and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with Tiaa-cref Lifecycle. 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 Lifecycle has no effect on the direction of Target Retirement i.e., Target Retirement and Tiaa-cref Lifecycle go up and down completely randomly.
Pair Corralation between Target Retirement and Tiaa-cref Lifecycle
Assuming the 90 days horizon Target Retirement is expected to generate 1.77 times less return on investment than Tiaa-cref Lifecycle. But when comparing it to its historical volatility, Target Retirement 2040 is 1.08 times less risky than Tiaa-cref Lifecycle. It trades about 0.06 of its potential returns per unit of risk. Tiaa Cref Lifecycle Index is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,057 in Tiaa Cref Lifecycle Index on September 3, 2024 and sell it today you would earn a total of 412.00 from holding Tiaa Cref Lifecycle Index or generate 38.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. Tiaa Cref Lifecycle Index
Performance |
| Timeline |
| Target Retirement 2040 |
| Tiaa Cref Lifecycle |
Target Retirement and Tiaa-cref Lifecycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Tiaa-cref Lifecycle
The main advantage of trading using opposite Target Retirement and Tiaa-cref Lifecycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Tiaa-cref Lifecycle 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 Lifecycle will offset losses from the drop in Tiaa-cref Lifecycle's long position.| Target Retirement vs. Barings Active Short | Target Retirement vs. Siit Ultra Short | Target Retirement vs. Astor Longshort Fund | Target Retirement vs. Goldman Sachs Short |
| Tiaa-cref Lifecycle vs. Tiaa Cref Emerging Markets | Tiaa-cref Lifecycle vs. Tiaa Cref Emerging Markets | Tiaa-cref Lifecycle vs. Tiaa Cref Emerging Markets |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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