Correlation Between American Funds and Putnam Equity
Can any of the company-specific risk be diversified away by investing in both American Funds and Putnam Equity 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 American Funds and Putnam Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Putnam Equity Income, you can compare the effects of market volatilities on American Funds and Putnam Equity 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 American Funds with a short position of Putnam Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Putnam Equity.
Diversification Opportunities for American Funds and Putnam Equity
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Putnam is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income and American Funds 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 American Funds American are associated (or correlated) with Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of American Funds i.e., American Funds and Putnam Equity go up and down completely randomly.
Pair Corralation between American Funds and Putnam Equity
Assuming the 90 days horizon American Funds is expected to generate 1.74 times less return on investment than Putnam Equity. But when comparing it to its historical volatility, American Funds American is 1.13 times less risky than Putnam Equity. It trades about 0.14 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,748 in Putnam Equity Income on August 29, 2024 and sell it today you would earn a total of 134.00 from holding Putnam Equity Income or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds American vs. Putnam Equity Income
Performance |
| Timeline |
| American Funds American |
| Putnam Equity Income |
American Funds and Putnam Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Putnam Equity
The main advantage of trading using opposite American Funds and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Putnam Equity 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 Equity will offset losses from the drop in Putnam Equity's long position.| American Funds vs. Ishares Municipal Bond | American Funds vs. Transamerica Intermediate Muni | American Funds vs. Baird Strategic Municipal | American Funds vs. Federated Government Ultrashort |
| Putnam Equity vs. Dodge Cox Stock | Putnam Equity vs. American Mutual Fund | Putnam Equity vs. American Funds American | Putnam Equity vs. American Funds American |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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