Correlation Between Vanguard Small-cap and Tiaa Cref

Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard 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 Vanguard Small Cap Value and Tiaa Cref Mid Cap Growth, you can compare the effects of market volatilities on Vanguard 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 Vanguard Small-cap with a short position of Tiaa Cref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Tiaa Cref.

Diversification Opportunities for Vanguard Small-cap and Tiaa Cref

0.97

Correlation Coefficient

Vanguard Small-cap  Tiaa Cref

Almost no diversification

The 3 months correlation between Vanguard and Tiaa is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Tiaa Cref Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Mid and Vanguard 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 Vanguard Small Cap Value 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 Mid has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Tiaa Cref go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Tiaa Cref

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.03 times more return on investment than Tiaa Cref. However, Vanguard Small-cap is 1.03 times more volatile than Tiaa Cref Mid Cap Growth. It trades about 0.07 of its potential returns per unit of risk. Tiaa Cref Mid Cap Growth is currently generating about 0.06 per unit of risk. If you would invest  3,681  in Vanguard Small Cap Value on September 5, 2024 and sell it today you would earn a total of  1,455  from holding Vanguard Small Cap Value or generate 39.53% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Tiaa Cref Mid Cap Growth

Vanguard Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tiaa Cref Mid

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Mid Cap Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tiaa Cref showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small-cap and Tiaa Cref

The main advantage of trading using opposite Vanguard Small-cap and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard Small Cap Value and Tiaa Cref Mid Cap Growth 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.