Correlation Between Vanguard Total and TIAA Real

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

Diversification Opportunities for Vanguard Total and TIAA Real

-0.86
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Vanguard and QREARX is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and TIAA Real Estate Account in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIAA Real Estate and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with TIAA Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIAA Real Estate has no effect on the direction of Vanguard Total i.e., Vanguard Total and TIAA Real go up and down completely randomly.

Pair Corralation between Vanguard Total and TIAA Real

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the TIAA Real. In addition to that, Vanguard Total is 15.7 times more volatile than TIAA Real Estate. It trades about -0.13 of its total potential returns per unit of risk. TIAA Real Estate is currently generating about 0.63 per unit of volatility. If you would invest  54,275  in TIAA Real Estate on March 31, 2022 and sell it today you would earn a total of  2,499  from holding TIAA Real Estate or generate 4.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Vanguard Total Stock  vs.  TIAA Real Estate Account

 Performance (%) 
      Timeline 
Vanguard Total Stock 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the fund investors.

Vanguard Price Channel

TIAA Real Estate 
QREARX Performance
48 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in TIAA Real Estate are ranked lower than 48 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, TIAA Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

QREARX Price Channel

Vanguard Total and TIAA Real Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Vanguard Total and TIAA Real

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

Vanguard Total Stock

Pair trading matchups for Vanguard Total

Star Bulk vs. Vanguard Total
Kroger vs. Vanguard Total
U S vs. Vanguard Total
Valhi vs. Vanguard Total
Mesabi Trust vs. Vanguard Total
Burford Capital vs. Vanguard Total
Geely Automobile vs. Vanguard Total
TOURMALINE OIL vs. Vanguard Total
Daqo New vs. Vanguard Total
Stealthgas vs. Vanguard Total
Gran Tierra vs. Vanguard Total
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Vanguard Total as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Vanguard Total's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Vanguard Total's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Vanguard Total Stock.
The idea behind Vanguard Total Stock and TIAA Real Estate 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.

TIAA Real Estate

Pair trading matchups for TIAA Real

American Manganese vs. TIAA Real
Valhi vs. TIAA Real
Mesabi Trust vs. TIAA Real
Gran Tierra vs. TIAA Real
Walgreens Boots vs. TIAA Real
Star Bulk vs. TIAA Real
TOURMALINE OIL vs. TIAA Real
Stealthgas vs. TIAA Real
Burford Capital vs. TIAA Real
Daqo New vs. TIAA Real
Geely Automobile vs. TIAA Real
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against TIAA Real as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. TIAA Real's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, TIAA Real's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to TIAA Real Estate.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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