Correlation Between Vanguard Small-cap and Massmutual Select
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap 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 Small-cap 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 Small Cap Index and Massmutual Select Small, you can compare the effects of market volatilities on Vanguard Small-cap 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 Small-cap with a short position of Massmutual Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Massmutual Select.
Diversification Opportunities for Vanguard Small-cap and Massmutual Select
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Massmutual is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Massmutual Select Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Select Small and Vanguard Small-cap 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 Small Cap 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 Small has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Massmutual Select go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Massmutual Select
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.01 times less return on investment than Massmutual Select. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.35 times less risky than Massmutual Select. It trades about 0.37 of its potential returns per unit of risk. Massmutual Select Small is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 908.00 in Massmutual Select Small on September 4, 2024 and sell it today you would earn a total of 88.00 from holding Massmutual Select Small or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Massmutual Select Small
Performance |
| Timeline |
| Vanguard Small Cap |
| Massmutual Select Small |
Vanguard Small-cap and Massmutual Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Massmutual Select
The main advantage of trading using opposite Vanguard Small-cap and Massmutual Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap 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 Small-cap vs. Vanguard Mid Cap Index | Vanguard Small-cap vs. Vanguard Reit Index | Vanguard Small-cap vs. Vanguard Value Index | Vanguard Small-cap vs. Vanguard Small Cap Value |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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