Correlation Between Bank of America and Putnam Growth
Can any of the company-specific risk be diversified away by investing in both Bank of America and Putnam Growth 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 Bank of America and Putnam Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Putnam Growth Opportunities, you can compare the effects of market volatilities on Bank of America and Putnam Growth 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 Bank of America with a short position of Putnam Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Putnam Growth.
Diversification Opportunities for Bank of America and Putnam Growth
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Putnam is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Putnam Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Growth Opport and Bank of America 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 Bank of America are associated (or correlated) with Putnam Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Growth Opport has no effect on the direction of Bank of America i.e., Bank of America and Putnam Growth go up and down completely randomly.
Pair Corralation between Bank of America and Putnam Growth
Considering the 90-day investment horizon Bank of America is expected to generate 1.15 times less return on investment than Putnam Growth. In addition to that, Bank of America is 1.58 times more volatile than Putnam Growth Opportunities. It trades about 0.06 of its total potential returns per unit of risk. Putnam Growth Opportunities is currently generating about 0.1 per unit of volatility. If you would invest 3,002 in Putnam Growth Opportunities on September 3, 2024 and sell it today you would earn a total of 1,808 from holding Putnam Growth Opportunities or generate 60.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Putnam Growth Opportunities
Performance |
| Timeline |
| Bank of America |
| Putnam Growth Opport |
Bank of America and Putnam Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Putnam Growth
The main advantage of trading using opposite Bank of America and Putnam Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Putnam Growth 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 Growth will offset losses from the drop in Putnam Growth's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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