Correlation Between NYSE Composite and TIAA CREF

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and TIAA CREF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and TIAA CREF LIFECYCLE INDEX, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of TIAA CREF. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and TIAA CREF.

Diversification Opportunities for NYSE Composite and TIAA CREF

  Correlation Coefficient

Almost no diversification

The 3 months correlation between NYSE and TIAA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and TIAA-CREF LIFECYCLE INDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIAA-CREF LIFECYCLE INDEX and NYSE Composite 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 NYSE Composite 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 INDEX has no effect on the direction of NYSE Composite i.e., NYSE Composite and TIAA CREF go up and down completely randomly.

Pair Corralation between NYSE Composite and TIAA CREF

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the TIAA CREF. In addition to that, NYSE Composite is 1.76 times more volatile than TIAA CREF LIFECYCLE INDEX. It trades about -0.29 of its total potential returns per unit of risk. TIAA CREF LIFECYCLE INDEX is currently generating about -0.42 per unit of volatility. If you would invest  1,827  in TIAA CREF LIFECYCLE INDEX on July 2, 2023 and sell it today you would lose (56.00) from holding TIAA CREF LIFECYCLE INDEX or give up 3.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
ValuesDaily Returns



NYSE Composite and TIAA CREF Volatility Contrast

   Predicted Return Density   

Pair Trading with NYSE Composite and TIAA CREF

The main advantage of trading using opposite NYSE Composite and TIAA CREF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite and TIAA CREF LIFECYCLE INDEX 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.
Check out your portfolio center. 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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