Correlation Between Capital One and Putnam Municipal
Can any of the company-specific risk be diversified away by investing in both Capital One and Putnam Municipal 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 Capital One and Putnam Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital One Financial and Putnam Municipal Opportunities, you can compare the effects of market volatilities on Capital One and Putnam Municipal 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 Capital One with a short position of Putnam Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Putnam Municipal.
Diversification Opportunities for Capital One and Putnam Municipal
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and Putnam is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Putnam Municipal Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Municipal Opp and Capital One 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 Capital One Financial are associated (or correlated) with Putnam Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Municipal Opp has no effect on the direction of Capital One i.e., Capital One and Putnam Municipal go up and down completely randomly.
Pair Corralation between Capital One and Putnam Municipal
Considering the 90-day investment horizon Capital One Financial is expected to generate 2.85 times more return on investment than Putnam Municipal. However, Capital One is 2.85 times more volatile than Putnam Municipal Opportunities. It trades about 0.12 of its potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.05 per unit of risk. If you would invest 10,541 in Capital One Financial on September 14, 2024 and sell it today you would earn a total of 7,908 from holding Capital One Financial or generate 75.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Putnam Municipal Opportunities
Performance |
| Timeline |
| Capital One Financial |
| Putnam Municipal Opp |
Capital One and Putnam Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Putnam Municipal
The main advantage of trading using opposite Capital One and Putnam Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Putnam Municipal 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 Municipal will offset losses from the drop in Putnam Municipal's long position.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally Financial |
| Putnam Municipal vs. Invesco Municipal Income | Putnam Municipal vs. DWS Municipal Income | Putnam Municipal vs. MFS Municipal Income | Putnam Municipal vs. MFS High Income |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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