Correlation Between Massmutual Select and Western Asset

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

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

Diversification Opportunities for Massmutual Select and Western Asset

0.16

Correlation Coefficient

Massmutual Select  Western Asset

Average diversification

The 3 months correlation between MASSMUTUAL and Western is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Massmutual Select Diversified and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Massmutual Select 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 Select Diversified are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Diversified has no effect on the direction of Massmutual Select i.e., Massmutual Select and Western Asset go up and down completely randomly.

Pair Corralation between Massmutual Select and Western Asset

Assuming the 90 days horizon Massmutual Select Diversified is expected to generate 3.51 times more return on investment than Western Asset. However, Massmutual Select is 3.51 times more volatile than Western Asset Diversified. It trades about 0.05 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.07 per unit of risk. If you would invest  970.00  in Massmutual Select Diversified on December 25, 2024 and sell it today you would earn a total of  24.00  from holding Massmutual Select Diversified or generate 2.47% return on investment over 90 days.

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

Massmutual Select Diversified  vs.  Western Asset Diversified

Massmutual Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Massmutual Select Diversified are ranked lower than 4 (%) 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.

Western Asset Diversified

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Diversified are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Massmutual Select and Western Asset

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

The idea behind Massmutual Select Diversified and Western Asset Diversified 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.