Correlation Between FlexShares STOXX and Putnam Sustainable
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and Putnam Sustainable 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 FlexShares STOXX and Putnam Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares STOXX Global and Putnam Sustainable Future, you can compare the effects of market volatilities on FlexShares STOXX and Putnam Sustainable 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 FlexShares STOXX with a short position of Putnam Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and Putnam Sustainable.
Diversification Opportunities for FlexShares STOXX and Putnam Sustainable
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and Putnam is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and Putnam Sustainable Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable Future and FlexShares STOXX 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 FlexShares STOXX Global are associated (or correlated) with Putnam Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable Future has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and Putnam Sustainable go up and down completely randomly.
Pair Corralation between FlexShares STOXX and Putnam Sustainable
Given the investment horizon of 90 days FlexShares STOXX is expected to generate 10.85 times less return on investment than Putnam Sustainable. But when comparing it to its historical volatility, FlexShares STOXX Global is 1.4 times less risky than Putnam Sustainable. It trades about 0.03 of its potential returns per unit of risk. Putnam Sustainable Future is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,531 in Putnam Sustainable Future on August 30, 2024 and sell it today you would earn a total of 130.00 from holding Putnam Sustainable Future or generate 5.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares STOXX Global vs. Putnam Sustainable Future
Performance |
| Timeline |
| FlexShares STOXX Global |
| Putnam Sustainable Future |
FlexShares STOXX and Putnam Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and Putnam Sustainable
The main advantage of trading using opposite FlexShares STOXX and Putnam Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, Putnam Sustainable 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 Sustainable will offset losses from the drop in Putnam Sustainable's long position.| FlexShares STOXX vs. FlexShares Quality Large | FlexShares STOXX vs. FlexShares Disciplined Duration | FlexShares STOXX vs. FlexShares Real Assets | FlexShares STOXX vs. First Trust Developed |
| Putnam Sustainable vs. Putnam Sustainable Leaders | Putnam Sustainable vs. Putnam Focused Large | Putnam Sustainable vs. FlexShares STOXX Global | Putnam Sustainable vs. Putnam Focused Large |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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