Correlation Between Vanguard Financials and Massmutual Premier

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

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

Diversification Opportunities for Vanguard Financials and Massmutual Premier

-0.87

Correlation Coefficient

Vanguard Financials  Massmutual Premier

Pay attention - limited upside

The 3 months correlation between Vanguard and Massmutual is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Massmutual Premier Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Premier and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Massmutual Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massmutual Premier has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Massmutual Premier go up and down completely randomly.

Pair Corralation between Vanguard Financials and Massmutual Premier

Assuming the 90 days horizon Vanguard Financials Index is expected to generate 0.51 times more return on investment than Massmutual Premier. However, Vanguard Financials Index is 1.98 times less risky than Massmutual Premier. It trades about -0.1 of its potential returns per unit of risk. Massmutual Premier International is currently generating about -0.2 per unit of risk. If you would invest  6,147  in Vanguard Financials Index on September 19, 2024 and sell it today you would lose (89.00) from holding Vanguard Financials Index or give up 1.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Vanguard Financials Index  vs.  Massmutual Premier Internation

Vanguard Financials Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Massmutual Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Massmutual Premier International 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Financials and Massmutual Premier

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

The idea behind Vanguard Financials Index and Massmutual Premier International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.