Correlation Between Massmutual Retiresmart and Transamerica Financial

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

By analyzing existing cross correlation between Massmutual Retiresmart 2025 and Transamerica Financial Life, you can compare the effects of market volatilities on Massmutual Retiresmart and Transamerica Financial 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 Retiresmart with a short position of Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Massmutual Retiresmart and Transamerica Financial.

Diversification Opportunities for Massmutual Retiresmart and Transamerica Financial

0.9

Correlation Coefficient

Massmutual Retiresmart  Transamerica Financial

Almost no diversification

The 3 months correlation between Massmutual and Transamerica is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Massmutual Retiresmart 2025 and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial and Massmutual Retiresmart 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 Retiresmart 2025 are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Massmutual Retiresmart i.e., Massmutual Retiresmart and Transamerica Financial go up and down completely randomly.

Pair Corralation between Massmutual Retiresmart and Transamerica Financial

Assuming the 90 days horizon Massmutual Retiresmart 2025 is expected to generate 0.39 times more return on investment than Transamerica Financial. However, Massmutual Retiresmart 2025 is 2.55 times less risky than Transamerica Financial. It trades about -0.08 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about -0.09 per unit of risk. If you would invest  1,077  in Massmutual Retiresmart 2025 on October 22, 2024 and sell it today you would lose (26.00) from holding Massmutual Retiresmart 2025 or give up 2.41% of portfolio value over 90 days.

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

Massmutual Retiresmart 2025  vs.  Transamerica Financial Life

Massmutual Retiresmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Massmutual Retiresmart 2025 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Massmutual Retiresmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transamerica Financial Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Retiresmart and Transamerica Financial

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

The idea behind Massmutual Retiresmart 2025 and Transamerica Financial Life 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.