Correlation Between Dow Jones and Putnam Municipal
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Putnam Municipal 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 Municipal Opportunities, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Putnam Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Putnam Municipal.
Diversification Opportunities for Dow Jones and Putnam Municipal
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Putnam is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 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 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 Dow Jones i.e., Dow Jones and Putnam Municipal go up and down completely randomly.
Pair Corralation between Dow Jones and Putnam Municipal
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.72 times more return on investment than Putnam Municipal. However, Dow Jones Industrial is 1.39 times less risky than Putnam Municipal. It trades about 0.08 of its potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.01 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Putnam Municipal Opportunities
Performance |
| Timeline |
Dow Jones and Putnam Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Putnam Municipal Opportunities
Pair trading matchups for Putnam Municipal
Pair Trading with Dow Jones and Putnam Municipal
The main advantage of trading using opposite Dow Jones and Putnam Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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