Correlation Between Tiaa Cref and First Trust

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

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

Diversification Opportunities for Tiaa Cref and First Trust

0.97

Correlation Coefficient

Tiaa Cref  First Trust

Almost no diversification

The 3 months correlation between Tiaa and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Tiaa Cref Small Cap Equity and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Tiaa Cref 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 Small Cap Equity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Tiaa Cref i.e., Tiaa Cref and First Trust go up and down completely randomly.

Pair Corralation between Tiaa Cref and First Trust

Assuming the 90 days horizon Tiaa Cref Small Cap Equity is expected to generate 7.75 times more return on investment than First Trust. However, Tiaa Cref is 7.75 times more volatile than First Trust Short. It trades about 0.2 of its potential returns per unit of risk. First Trust Short is currently generating about 0.32 per unit of risk. If you would invest  1,653  in Tiaa Cref Small Cap Equity on April 30, 2025 and sell it today you would earn a total of  218.00  from holding Tiaa Cref Small Cap Equity or generate 13.19% return on investment over 90 days.

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

Tiaa Cref Small Cap Equity  vs.  First Trust Short

Tiaa Cref Small

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tiaa Cref Small Cap Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Tiaa Cref showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Short

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tiaa Cref and First Trust

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

The idea behind Tiaa Cref Small Cap Equity and First Trust Short 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.