Correlation Between Citigroup and Putnam Small
Can any of the company-specific risk be diversified away by investing in both Citigroup and Putnam Small 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 Citigroup and Putnam Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Putnam Small Cap, you can compare the effects of market volatilities on Citigroup and Putnam Small 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 Citigroup with a short position of Putnam Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Putnam Small.
Diversification Opportunities for Citigroup and Putnam Small
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Putnam is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Putnam Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Small Cap and Citigroup 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 Citigroup are associated (or correlated) with Putnam Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Putnam Small go up and down completely randomly.
Pair Corralation between Citigroup and Putnam Small
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.44 times more return on investment than Putnam Small. However, Citigroup is 1.44 times more volatile than Putnam Small Cap. It trades about 0.07 of its potential returns per unit of risk. Putnam Small Cap is currently generating about 0.1 per unit of risk. If you would invest 4,360 in Citigroup on August 28, 2024 and sell it today you would earn a total of 2,715 from holding Citigroup or generate 62.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Putnam Small Cap
Performance |
| Timeline |
| Citigroup |
| Putnam Small Cap |
Citigroup and Putnam Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Putnam Small
The main advantage of trading using opposite Citigroup and Putnam Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Putnam Small 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 Small will offset losses from the drop in Putnam Small's long position.The idea behind Citigroup and Putnam Small Cap 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.| Putnam Small vs. Putnam Equity Income | Putnam Small vs. Putnam Tax Exempt | Putnam Small vs. Putnam Floating Rate | Putnam Small vs. Putnam Floating Rate |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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