Correlation Between Dow Jones and Putnam Focused
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Putnam Focused 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 Focused 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 Focused Equity, you can compare the effects of market volatilities on Dow Jones and Putnam Focused 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 Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Putnam Focused.
Diversification Opportunities for Dow Jones and Putnam Focused
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Putnam is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Putnam Focused Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Equity 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 Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Equity has no effect on the direction of Dow Jones i.e., Dow Jones and Putnam Focused go up and down completely randomly.
Pair Corralation between Dow Jones and Putnam Focused
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.16 times more return on investment than Putnam Focused. However, Dow Jones is 1.16 times more volatile than Putnam Focused Equity. It trades about 0.29 of its potential returns per unit of risk. Putnam Focused Equity is currently generating about 0.15 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Putnam Focused Equity
Performance |
| Timeline |
Dow Jones and Putnam Focused Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Putnam Focused Equity
Pair trading matchups for Putnam Focused
Pair Trading with Dow Jones and Putnam Focused
The main advantage of trading using opposite Dow Jones and Putnam Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Putnam Focused 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 Focused will offset losses from the drop in Putnam Focused's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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