Correlation Between Ford and Putnam Global
Can any of the company-specific risk be diversified away by investing in both Ford and Putnam Global 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 Ford and Putnam Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Putnam Global Health, you can compare the effects of market volatilities on Ford and Putnam Global 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 Ford with a short position of Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Putnam Global.
Diversification Opportunities for Ford and Putnam Global
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Putnam is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Putnam Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Health and Ford 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 Ford Motor are associated (or correlated) with Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Health has no effect on the direction of Ford i.e., Ford and Putnam Global go up and down completely randomly.
Pair Corralation between Ford and Putnam Global
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Putnam Global. In addition to that, Ford is 1.87 times more volatile than Putnam Global Health. It trades about -0.18 of its total potential returns per unit of risk. Putnam Global Health is currently generating about -0.17 per unit of volatility. If you would invest 6,934 in Putnam Global Health on October 26, 2024 and sell it today you would lose (387.00) from holding Putnam Global Health or give up 5.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.5% |
| Values | Daily Returns |
Ford Motor vs. Putnam Global Health
Performance |
| Timeline |
| Ford Motor |
| Putnam Global Health |
Ford and Putnam Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Putnam Global
The main advantage of trading using opposite Ford and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Putnam Global 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 Global will offset losses from the drop in Putnam Global's long position.The idea behind Ford Motor and Putnam Global Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Putnam Global vs. Investec Emerging Markets | Putnam Global vs. Ashmore Emerging Markets | Putnam Global vs. Vanguard Lifestrategy Moderate | Putnam Global vs. Angel Oak Multi Strategy |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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