Correlation Between Massmutual Premier and Small Cap

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

By analyzing existing cross correlation between Massmutual Premier Diversified and Small Cap Core, you can compare the effects of market volatilities on Massmutual Premier and Small Cap 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 Massmutual Premier with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Massmutual Premier and Small Cap.

Diversification Opportunities for Massmutual Premier and Small Cap

0.39

Correlation Coefficient

Massmutual Premier  Small Cap

Weak diversification

The 3 months correlation between Massmutual and Small is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Massmutual Premier Diversified and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Massmutual Premier 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 Massmutual Premier Diversified are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Massmutual Premier i.e., Massmutual Premier and Small Cap go up and down completely randomly.

Pair Corralation between Massmutual Premier and Small Cap

Assuming the 90 days horizon Massmutual Premier Diversified is expected to generate 0.17 times more return on investment than Small Cap. However, Massmutual Premier Diversified is 5.88 times less risky than Small Cap. It trades about 0.06 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.22 per unit of risk. If you would invest  819.00  in Massmutual Premier Diversified on November 28, 2024 and sell it today you would earn a total of  9.00  from holding Massmutual Premier Diversified or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Massmutual Premier Diversified  vs.  Small Cap Core

Massmutual Premier

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Massmutual Premier Diversified are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Massmutual Premier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Core 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Massmutual Premier and Small Cap

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

The idea behind Massmutual Premier Diversified and Small Cap Core 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 Anywhere module to track or share privately all of your investments from the convenience of any device.