Correlation Between Dow Jones and Putnam Diversified
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Putnam Diversified 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 Dow Jones and Putnam Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Putnam Diversified Income, you can compare the effects of market volatilities on Dow Jones and Putnam Diversified 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 Dow Jones with a short position of Putnam Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Putnam Diversified.
Diversification Opportunities for Dow Jones and Putnam Diversified
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Putnam is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Putnam Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Diversified Income and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Putnam Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Diversified Income has no effect on the direction of Dow Jones i.e., Dow Jones and Putnam Diversified go up and down completely randomly.
Pair Corralation between Dow Jones and Putnam Diversified
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.59 times more return on investment than Putnam Diversified. However, Dow Jones is 2.59 times more volatile than Putnam Diversified Income. It trades about 0.13 of its potential returns per unit of risk. Putnam Diversified Income is currently generating about 0.12 per unit of risk. If you would invest 3,611,738 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 879,327 from holding Dow Jones Industrial or generate 24.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Putnam Diversified Income
Performance |
| Timeline |
Dow Jones and Putnam Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Putnam Diversified Income
Pair trading matchups for Putnam Diversified
Pair Trading with Dow Jones and Putnam Diversified
The main advantage of trading using opposite Dow Jones and Putnam Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Putnam Diversified 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 Diversified will offset losses from the drop in Putnam Diversified's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Putnam Diversified vs. Putnam Equity Income | Putnam Diversified vs. Putnam Tax Exempt | Putnam Diversified vs. Putnam Floating Rate | Putnam Diversified vs. Putnam High Yield |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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