Correlation Between Rational Defensive and Tiaa Cref

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

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

Diversification Opportunities for Rational Defensive and Tiaa Cref

0.35

Correlation Coefficient

Rational Defensive  Tiaa Cref

Weak diversification

The 3 months correlation between Rational and Tiaa is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Tiaa Cref Small Cap Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Small and Rational Defensive 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 Rational Defensive Growth 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 Small has no effect on the direction of Rational Defensive i.e., Rational Defensive and Tiaa Cref go up and down completely randomly.

Pair Corralation between Rational Defensive and Tiaa Cref

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 0.64 times more return on investment than Tiaa Cref. However, Rational Defensive Growth is 1.57 times less risky than Tiaa Cref. It trades about 0.06 of its potential returns per unit of risk. Tiaa Cref Small Cap Blend is currently generating about -0.36 per unit of risk. If you would invest  4,045  in Rational Defensive Growth on September 27, 2024 and sell it today you would earn a total of  46.00  from holding Rational Defensive Growth or generate 1.14% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Tiaa Cref Small Cap Blend

Rational Defensive Growth

Risk-Adjusted Performance

11 of 100

Good

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

Tiaa Cref Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiaa Cref Small Cap Blend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, 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 Rational Defensive and Tiaa Cref

The main advantage of trading using opposite Rational Defensive and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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 Rational Defensive Growth and Tiaa Cref Small Cap Blend 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.