Correlation Between Transamerica Financial and Putnam Global
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial 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 Transamerica Financial and Putnam Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Financial Life and Putnam Global Financials, you can compare the effects of market volatilities on Transamerica Financial 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 Transamerica Financial with a short position of Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Putnam Global.
Diversification Opportunities for Transamerica Financial and Putnam Global
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transamerica and Putnam is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Putnam Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Financials and Transamerica Financial 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 Transamerica Financial Life 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 Financials has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Putnam Global go up and down completely randomly.
Pair Corralation between Transamerica Financial and Putnam Global
Assuming the 90 days horizon Transamerica Financial is expected to generate 6.57 times less return on investment than Putnam Global. In addition to that, Transamerica Financial is 1.73 times more volatile than Putnam Global Financials. It trades about 0.01 of its total potential returns per unit of risk. Putnam Global Financials is currently generating about 0.07 per unit of volatility. If you would invest 968.00 in Putnam Global Financials on October 19, 2024 and sell it today you would earn a total of 71.00 from holding Putnam Global Financials or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 40.4% |
| Values | Daily Returns |
Transamerica Financial Life vs. Putnam Global Financials
Performance |
| Timeline |
| Transamerica Financial |
| Putnam Global Financials |
Transamerica Financial and Putnam Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Financial and Putnam Global
The main advantage of trading using opposite Transamerica Financial and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial 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 Transamerica Financial Life and Putnam Global Financials 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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