Correlation Between Microsoft and Putnam Sustainable
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Putnam Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Putnam Sustainable Future, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Putnam Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Putnam Sustainable.
Diversification Opportunities for Microsoft and Putnam Sustainable
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Putnam is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Putnam Sustainable go up and down completely randomly.
Pair Corralation between Microsoft and Putnam Sustainable
Given the investment horizon of 90 days Microsoft is expected to under-perform the Putnam Sustainable. In addition to that, Microsoft is 1.73 times more volatile than Putnam Sustainable Future. It trades about -0.06 of its total potential returns per unit of risk. Putnam Sustainable Future is currently generating about 0.25 per unit of volatility. If you would invest 2,510 in Putnam Sustainable Future on August 26, 2024 and sell it today you would earn a total of 135.00 from holding Putnam Sustainable Future or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Putnam Sustainable Future
Performance |
| Timeline |
| Microsoft |
| Putnam Sustainable Future |
Microsoft and Putnam Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Putnam Sustainable
The main advantage of trading using opposite Microsoft and Putnam Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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