Correlation measures how closely two funds move together, from 1.0 (they move in perfect lockstep) to 0 (no relationship) to -1.0 (they move in exact opposite directions). Holding two highly-correlated funds gives you less real diversification than it looks like on paper. You're still exposed to mostly the same risk, just spread across two names. The table below is computed from daily TSP price history since 2003.
Correlation computed from day-to-day percentage price changes across TSP's full daily share price history (2003–2026). Correlation describes the past. It can and does shift over different market periods.
The G and F Funds have essentially zero correlation with the stock funds. That's exactly their role: a genuine counterweight when stocks fall. Among the three stock funds, the I Fund provides the most real diversification, since international markets don't move in perfect sync with U.S. markets. C and S, tracking different slices of the same U.S. stock market, mostly rise and fall together.
None of this means C and S are redundant. S Fund still adds exposure to small and mid-cap companies the C Fund doesn't hold, but it does mean the diversification benefit of splitting money between them is smaller than splitting between, say, C and I, or any stock fund and the G Fund.