Correlation Between Davis Real and Massmutual Select

Can any of the company-specific risk be diversified away by investing in both Davis Real and Massmutual Select 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 Davis Real and Massmutual Select into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davis Real Estate and Massmutual Select Total, you can compare the effects of market volatilities on Davis Real and Massmutual Select 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 Davis Real with a short position of Massmutual Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Real and Massmutual Select.

Diversification Opportunities for Davis Real and Massmutual Select

0.82

Correlation Coefficient

Davis Real  Massmutual Select

Very poor diversification

The 3 months correlation between Davis and Massmutual is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate and Massmutual Select Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Select Total and Davis Real 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 Davis Real Estate are associated (or correlated) with Massmutual Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massmutual Select Total has no effect on the direction of Davis Real i.e., Davis Real and Massmutual Select go up and down completely randomly.

Pair Corralation between Davis Real and Massmutual Select

Assuming the 90 days horizon Davis Real Estate is expected to under-perform the Massmutual Select. In addition to that, Davis Real is 3.0 times more volatile than Massmutual Select Total. It trades about -0.13 of its total potential returns per unit of risk. Massmutual Select Total is currently generating about -0.05 per unit of volatility. If you would invest  831.00  in Massmutual Select Total on October 23, 2024 and sell it today you would lose (9.00) from holding Massmutual Select Total or give up 1.08% of portfolio value over 90 days.

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

Davis Real Estate  vs.  Massmutual Select Total

Davis Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davis Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Massmutual Select Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Massmutual Select Total has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Massmutual Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davis Real and Massmutual Select

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

The idea behind Davis Real Estate and Massmutual Select Total 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.