Correlation Between Davis Government and Tiaa Cref

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

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

Diversification Opportunities for Davis Government and Tiaa Cref

0.69

Correlation Coefficient

Davis Government  Tiaa Cref

Poor diversification

The 3 months correlation between Davis and Tiaa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Davis Government Bond 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 Davis Government 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 Davis Government Bond 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 Davis Government i.e., Davis Government and Tiaa Cref go up and down completely randomly.

Pair Corralation between Davis Government and Tiaa Cref

Assuming the 90 days horizon Davis Government is expected to generate 8.7 times less return on investment than Tiaa Cref. But when comparing it to its historical volatility, Davis Government Bond is 7.49 times less risky than Tiaa Cref. It trades about 0.11 of its potential returns per unit of risk. Tiaa Cref Lifecycle 2050 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,444  in Tiaa Cref Lifecycle 2050 on July 1, 2025 and sell it today you would earn a total of  231.00  from holding Tiaa Cref Lifecycle 2050 or generate 16.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Davis Government Bond  vs.  Tiaa Cref Lifecycle 2050

Davis Government Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Government Bond are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davis Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tiaa Cref Lifecycle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Lifecycle 2050 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Davis Government and Tiaa Cref

The main advantage of trading using opposite Davis Government and Tiaa Cref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Government 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 Davis Government Bond 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.