Correlation Between Davis Financial and Massmutual Select

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

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

Diversification Opportunities for Davis Financial and Massmutual Select

0.44

Correlation Coefficient

Davis Financial  Massmutual Select

Very weak diversification

The 3 months correlation between Davis and Massmutual is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Massmutual Select Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Select Mid and Davis Financial 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 Davis Financial Fund 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 Mid has no effect on the direction of Davis Financial i.e., Davis Financial and Massmutual Select go up and down completely randomly.

Pair Corralation between Davis Financial and Massmutual Select

Assuming the 90 days horizon Davis Financial Fund is expected to generate 1.03 times more return on investment than Massmutual Select. However, Davis Financial is 1.03 times more volatile than Massmutual Select Mid. It trades about 0.05 of its potential returns per unit of risk. Massmutual Select Mid is currently generating about -0.12 per unit of risk. If you would invest  6,404  in Davis Financial Fund on December 23, 2024 and sell it today you would earn a total of  192.00  from holding Davis Financial Fund or generate 3.0% return on investment over 90 days.

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

Davis Financial Fund  vs.  Massmutual Select Mid

Davis Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Davis Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Massmutual Select Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Massmutual Select Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential 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 Davis Financial and Massmutual Select

The main advantage of trading using opposite Davis Financial and Massmutual Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial 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 Davis Financial Fund and Massmutual Select Mid 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.