Correlation Between Tiaa-cref Inflation-linked and Smallcap World

Can any of the company-specific risk be diversified away by investing in both Tiaa-cref Inflation-linked and Smallcap World 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 Tiaa-cref Inflation-linked and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tiaa Cref Inflation Linked Bond and Smallcap World Fund, you can compare the effects of market volatilities on Tiaa-cref Inflation-linked and Smallcap World 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 Tiaa-cref Inflation-linked with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tiaa-cref Inflation-linked and Smallcap World.

Diversification Opportunities for Tiaa-cref Inflation-linked and Smallcap World

0.47

Correlation Coefficient

Tiaa-cref Inflation-linked  Smallcap World

Very weak diversification

The 3 months correlation between Tiaa-cref and Smallcap is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Inflation Linked Bon and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Tiaa-cref Inflation-linked 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 Tiaa Cref Inflation Linked Bond are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Tiaa-cref Inflation-linked i.e., Tiaa-cref Inflation-linked and Smallcap World go up and down completely randomly.

Pair Corralation between Tiaa-cref Inflation-linked and Smallcap World

Assuming the 90 days horizon Tiaa-cref Inflation-linked is expected to generate 8.91 times less return on investment than Smallcap World. But when comparing it to its historical volatility, Tiaa Cref Inflation Linked Bond is 4.04 times less risky than Smallcap World. It trades about 0.17 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  5,947  in Smallcap World Fund on April 21, 2025 and sell it today you would earn a total of  1,233  from holding Smallcap World Fund or generate 20.73% return on investment over 90 days.

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

Tiaa Cref Inflation Linked Bon  vs.  Smallcap World Fund

Tiaa-cref Inflation-linked

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Inflation Linked Bond are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Tiaa-cref Inflation-linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smallcap World

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Smallcap World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tiaa-cref Inflation-linked and Smallcap World

The main advantage of trading using opposite Tiaa-cref Inflation-linked and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tiaa-cref Inflation-linked position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.

The idea behind Tiaa Cref Inflation Linked Bond and Smallcap World Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.