Correlation Between Massmutual Select and Fidelity Contrafund

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

By analyzing existing cross correlation between Massmutual Select Mid Cap and Fidelity Contrafund, you can compare the effects of market volatilities on Massmutual Select and Fidelity Contrafund 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 Fidelity Contrafund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Massmutual Select and Fidelity Contrafund.

Diversification Opportunities for Massmutual Select and Fidelity Contrafund

0.22

Correlation Coefficient

Massmutual Select  Fidelity Contrafund

Modest diversification

The 3 months correlation between MASSMUTUAL and Fidelity is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Massmutual Select Mid Cap and Fidelity Contrafund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Contrafund 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 Mid Cap are associated (or correlated) with Fidelity Contrafund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Contrafund has no effect on the direction of Massmutual Select i.e., Massmutual Select and Fidelity Contrafund go up and down completely randomly.

Pair Corralation between Massmutual Select and Fidelity Contrafund

Assuming the 90 days horizon Massmutual Select Mid Cap is expected to under-perform the Fidelity Contrafund. In addition to that, Massmutual Select is 1.37 times more volatile than Fidelity Contrafund. It trades about -0.18 of its total potential returns per unit of risk. Fidelity Contrafund is currently generating about -0.09 per unit of volatility. If you would invest  2,256  in Fidelity Contrafund on December 4, 2024 and sell it today you would lose (145.00) from holding Fidelity Contrafund or give up 6.43% of portfolio value over 90 days.

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

Massmutual Select Mid Cap  vs.  Fidelity Contrafund

Massmutual Select Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Massmutual Select Mid Cap 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fidelity Contrafund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Contrafund 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.

Pair Trading with Massmutual Select and Fidelity Contrafund

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

The idea behind Massmutual Select Mid Cap and Fidelity Contrafund 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.