Correlation Between Vanguard 500 and Massmutual Select
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and Massmutual Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Massmutual Select Focused, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of Massmutual Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Massmutual Select.
Diversification Opportunities for Vanguard 500 and Massmutual Select
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Massmutual is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Massmutual Select Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Select Focused and Vanguard 500 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 500 Index 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 Focused has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Massmutual Select go up and down completely randomly.
Pair Corralation between Vanguard 500 and Massmutual Select
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.25 times more return on investment than Massmutual Select. However, Vanguard 500 is 1.25 times more volatile than Massmutual Select Focused. It trades about 0.1 of its potential returns per unit of risk. Massmutual Select Focused is currently generating about 0.08 per unit of risk. If you would invest 32,614 in Vanguard 500 Index on February 1, 2024 and sell it today you would earn a total of 13,891 from holding Vanguard 500 Index or generate 42.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard 500 Index vs. Massmutual Select Focused
Performance |
Timeline |
Vanguard 500 Index |
Massmutual Select Focused |
Vanguard 500 and Massmutual Select Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard 500 and Massmutual Select
The main advantage of trading using opposite Vanguard 500 and Massmutual Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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.Vanguard 500 vs. Vanguard Tax Managed Small Cap | Vanguard 500 vs. Vanguard Tax Managed Balanced | Vanguard 500 vs. Vanguard Developed Markets | Vanguard 500 vs. Vanguard Intermediate Term Tax Exempt |
Massmutual Select vs. Massmutual Select Mid | Massmutual Select vs. Massmutual Select Mid Cap | Massmutual Select vs. Massmutual Select Mid Cap | Massmutual Select vs. Massmutual Select Mid Cap |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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