Correlation Between Wasatch Small and Tiaa Cref

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

Diversification Opportunities for Wasatch Small and Tiaa Cref

0.97

Correlation Coefficient

Wasatch Small  Tiaa Cref

Almost no diversification

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

Pair Corralation between Wasatch Small and Tiaa Cref

Assuming the 90 days horizon Wasatch Small is expected to generate 1.25 times less return on investment than Tiaa Cref. In addition to that, Wasatch Small is 1.27 times more volatile than Tiaa Cref Smallmid Cap Equity. It trades about 0.14 of its total potential returns per unit of risk. Tiaa Cref Smallmid Cap Equity is currently generating about 0.23 per unit of volatility. If you would invest  1,553  in Tiaa Cref Smallmid Cap Equity on September 3, 2024 and sell it today you would earn a total of  235.00  from holding Tiaa Cref Smallmid Cap Equity or generate 15.13% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Tiaa Cref Smallmid Cap Equity

Wasatch Small Cap

Risk-Adjusted Performance

11 of 100

Good

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

Tiaa Cref Smallmid

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Wasatch Small and Tiaa Cref

The main advantage of trading using opposite Wasatch Small and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch 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 Wasatch Small Cap and Tiaa Cref Smallmid Cap Equity 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.