Correlation Between Transamerica Financial and Putnam Ultra
Can any of the company-specific risk be diversified away by investing in both Transamerica Financial and Putnam Ultra 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 Ultra 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 Ultra Short, you can compare the effects of market volatilities on Transamerica Financial and Putnam Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Financial and Putnam Ultra.
Diversification Opportunities for Transamerica Financial and Putnam Ultra
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transamerica and Putnam is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Financial Life and Putnam Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Ultra Short 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 Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Ultra Short has no effect on the direction of Transamerica Financial i.e., Transamerica Financial and Putnam Ultra go up and down completely randomly.
Pair Corralation between Transamerica Financial and Putnam Ultra
Assuming the 90 days horizon Transamerica Financial Life is expected to generate 7.2 times more return on investment than Putnam Ultra. However, Transamerica Financial is 7.2 times more volatile than Putnam Ultra Short. It trades about 0.07 of its potential returns per unit of risk. Putnam Ultra Short is currently generating about 0.2 per unit of risk. If you would invest 1,080 in Transamerica Financial Life on September 14, 2024 and sell it today you would earn a total of 132.00 from holding Transamerica Financial Life or generate 12.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Transamerica Financial Life vs. Putnam Ultra Short
Performance |
Timeline |
Transamerica Financial |
Putnam Ultra Short |
Transamerica Financial and Putnam Ultra Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Transamerica Financial and Putnam Ultra
The main advantage of trading using opposite Transamerica Financial and Putnam Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Financial position performs unexpectedly, Putnam Ultra 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 Ultra will offset losses from the drop in Putnam Ultra's long position.The idea behind Transamerica Financial Life and Putnam Ultra Short 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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