Correlation Between Western Asset and Massmutual Premier

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

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

Diversification Opportunities for Western Asset and Massmutual Premier

0.62

Correlation Coefficient

Western Asset  Massmutual Premier

Poor diversification

The 3 months correlation between Western and Massmutual is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Total and Massmutual Premier Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Premier and Western Asset 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 Western Asset Total 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 Western Asset i.e., Western Asset and Massmutual Premier go up and down completely randomly.

Pair Corralation between Western Asset and Massmutual Premier

Assuming the 90 days horizon Western Asset Total is expected to under-perform the Massmutual Premier. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Total is 1.14 times less risky than Massmutual Premier. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Massmutual Premier Diversified is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  824.00  in Massmutual Premier Diversified on October 8, 2024 and sell it today you would lose (14.00) from holding Massmutual Premier Diversified or give up 1.7% of portfolio value over 90 days.

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

Western Asset Total  vs.  Massmutual Premier Diversified

Western Asset Total

Risk-Adjusted Performance

0 of 100

Very Weak

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

Massmutual Premier

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Asset and Massmutual Premier

The main advantage of trading using opposite Western Asset and Massmutual Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Total and Massmutual Premier 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.