Correlation Between Ford and Massmutual Select

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

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

Diversification Opportunities for Ford and Massmutual Select

0.33

Correlation Coefficient

Ford  Massmutual Select

Weak diversification

The 3 months correlation between Ford and Massmutual is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Massmutual Select T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Select and Ford 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 Ford Motor 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 has no effect on the direction of Ford i.e., Ford and Massmutual Select go up and down completely randomly.

Pair Corralation between Ford and Massmutual Select

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Massmutual Select. In addition to that, Ford is 4.56 times more volatile than Massmutual Select T. It trades about -0.16 of its total potential returns per unit of risk. Massmutual Select T is currently generating about 0.27 per unit of volatility. If you would invest  1,832  in Massmutual Select T on September 16, 2024 and sell it today you would earn a total of  37.00  from holding Massmutual Select T or generate 2.02% return on investment over 90 days.

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

Ford Motor  vs.  Massmutual Select T

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Massmutual Select

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Massmutual Select T are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Ford and Massmutual Select

The main advantage of trading using opposite Ford and Massmutual Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Massmutual Select T 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.