Correlation Between Absolute Convertible and Massmutual Retiresmart

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

By analyzing existing cross correlation between Absolute Convertible Arbitrage and Massmutual Retiresmart 2035, you can compare the effects of market volatilities on Absolute Convertible and Massmutual Retiresmart 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 Absolute Convertible with a short position of Massmutual Retiresmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Massmutual Retiresmart.

Diversification Opportunities for Absolute Convertible and Massmutual Retiresmart

0.52

Correlation Coefficient

Absolute Convertible  Massmutual Retiresmart

Very weak diversification

The 3 months correlation between Absolute and Massmutual is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Massmutual Retiresmart 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massmutual Retiresmart and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Massmutual Retiresmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massmutual Retiresmart has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Massmutual Retiresmart go up and down completely randomly.

Pair Corralation between Absolute Convertible and Massmutual Retiresmart

Assuming the 90 days horizon Absolute Convertible is expected to generate 1.42 times less return on investment than Massmutual Retiresmart. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 7.28 times less risky than Massmutual Retiresmart. It trades about 0.25 of its potential returns per unit of risk. Massmutual Retiresmart 2035 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Massmutual Retiresmart 2035 on September 28, 2024 and sell it today you would earn a total of  95.00  from holding Massmutual Retiresmart 2035 or generate 9.27% return on investment over 90 days.

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

Absolute Convertible Arbitrage  vs.  Massmutual Retiresmart 2035

Absolute Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

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

Massmutual Retiresmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Massmutual Retiresmart 2035 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Absolute Convertible and Massmutual Retiresmart

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

The idea behind Absolute Convertible Arbitrage and Massmutual Retiresmart 2035 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.