Correlation Between Northern Small and Tiaa Cref

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

By analyzing existing cross correlation between Northern Small Cap and Tiaa Cref Lifecycle 2050, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Tiaa Cref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Tiaa Cref.

Diversification Opportunities for Northern Small and Tiaa Cref

0.77

Correlation Coefficient

Northern Small  Tiaa Cref

Poor diversification

The 3 months correlation between Northern and Tiaa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Tiaa Cref Lifecycle 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Lifecycle and Northern Small 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 Northern Small Cap 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 Lifecycle has no effect on the direction of Northern Small i.e., Northern Small and Tiaa Cref go up and down completely randomly.

Pair Corralation between Northern Small and Tiaa Cref

Assuming the 90 days horizon Northern Small Cap is expected to under-perform the Tiaa Cref. In addition to that, Northern Small is 6.53 times more volatile than Tiaa Cref Lifecycle 2050. It trades about -0.12 of its total potential returns per unit of risk. Tiaa Cref Lifecycle 2050 is currently generating about -0.08 per unit of volatility. If you would invest  1,530  in Tiaa Cref Lifecycle 2050 on September 30, 2024 and sell it today you would lose (57.00) from holding Tiaa Cref Lifecycle 2050 or give up 3.73% of portfolio value over 90 days.

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

Northern Small Cap  vs.  Tiaa Cref Lifecycle 2050

Northern Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Tiaa Cref Lifecycle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tiaa Cref Lifecycle 2050 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical 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 Northern Small and Tiaa Cref

The main advantage of trading using opposite Northern Small and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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 Northern Small Cap and Tiaa Cref Lifecycle 2050 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.