Correlation Between Absolute Convertible and Putnam Equity
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Putnam Equity 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 Putnam Equity 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 Putnam Equity Income, you can compare the effects of market volatilities on Absolute Convertible and Putnam Equity 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 Putnam Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Putnam Equity.
Diversification Opportunities for Absolute Convertible and Putnam Equity
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Absolute and Putnam is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income 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 Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Putnam Equity go up and down completely randomly.
Pair Corralation between Absolute Convertible and Putnam Equity
Assuming the 90 days horizon Absolute Convertible is expected to generate 8.61 times less return on investment than Putnam Equity. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 14.43 times less risky than Putnam Equity. It trades about 0.5 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3,625 in Putnam Equity Income on September 5, 2024 and sell it today you would earn a total of 165.00 from holding Putnam Equity Income or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Putnam Equity Income
Performance |
| Timeline |
| Absolute Convertible |
| Putnam Equity Income |
Absolute Convertible and Putnam Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Putnam Equity
The main advantage of trading using opposite Absolute Convertible and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Putnam Equity 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 Putnam Equity will offset losses from the drop in Putnam Equity's long position.| Absolute Convertible vs. The Hartford Small | Absolute Convertible vs. Tax Managed Mid Small | Absolute Convertible vs. Ab Small Cap | Absolute Convertible vs. Ab Small Cap |
| Putnam Equity vs. Absolute Convertible Arbitrage | Putnam Equity vs. Fidelity Sai Convertible | Putnam Equity vs. Virtus Convertible | Putnam Equity vs. Rationalpier 88 Convertible |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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