Correlation Between American Balanced and Putnam Dynamic
Can any of the company-specific risk be diversified away by investing in both American Balanced and Putnam Dynamic 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 American Balanced and Putnam Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Putnam Dynamic Asset, you can compare the effects of market volatilities on American Balanced and Putnam Dynamic 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 American Balanced with a short position of Putnam Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Putnam Dynamic.
Diversification Opportunities for American Balanced and Putnam Dynamic
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Putnam is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Putnam Dynamic Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Dynamic Asset and American Balanced 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 American Balanced Fund are associated (or correlated) with Putnam Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Dynamic Asset has no effect on the direction of American Balanced i.e., American Balanced and Putnam Dynamic go up and down completely randomly.
Pair Corralation between American Balanced and Putnam Dynamic
Assuming the 90 days horizon American Balanced is expected to generate 1.02 times less return on investment than Putnam Dynamic. But when comparing it to its historical volatility, American Balanced Fund is 1.07 times less risky than Putnam Dynamic. It trades about 0.09 of its potential returns per unit of risk. Putnam Dynamic Asset is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,397 in Putnam Dynamic Asset on September 3, 2024 and sell it today you would earn a total of 388.00 from holding Putnam Dynamic Asset or generate 27.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced Fund vs. Putnam Dynamic Asset
Performance |
| Timeline |
| American Balanced |
| Putnam Dynamic Asset |
American Balanced and Putnam Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Putnam Dynamic
The main advantage of trading using opposite American Balanced and Putnam Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Putnam Dynamic 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 Dynamic will offset losses from the drop in Putnam Dynamic's long position.| American Balanced vs. Mondrian Emerging Markets | American Balanced vs. Transamerica Emerging Markets | American Balanced vs. The Hartford Emerging | American Balanced vs. Kinetics Market Opportunities |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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