Correlation Between Microsoft and Putnam Income
Can any of the company-specific risk be diversified away by investing in both Microsoft and Putnam Income 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 Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Putnam Income Fund, you can compare the effects of market volatilities on Microsoft and Putnam Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Putnam Income.
Diversification Opportunities for Microsoft and Putnam Income
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Putnam is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Putnam Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Income 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Income has no effect on the direction of Microsoft i.e., Microsoft and Putnam Income go up and down completely randomly.
Pair Corralation between Microsoft and Putnam Income
Given the investment horizon of 90 days Microsoft is expected to generate 3.53 times more return on investment than Putnam Income. However, Microsoft is 3.53 times more volatile than Putnam Income Fund. It trades about 0.08 of its potential returns per unit of risk. Putnam Income Fund is currently generating about 0.04 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% 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 Income Fund
Performance |
| Timeline |
| Microsoft |
| Putnam Income |
Microsoft and Putnam Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Putnam Income
The main advantage of trading using opposite Microsoft and Putnam Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Putnam Income 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 Income will offset losses from the drop in Putnam Income's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Putnam Income vs. Putnam Equity Income | Putnam Income vs. Putnam Tax Exempt | Putnam Income vs. Putnam Floating Rate | Putnam Income vs. Putnam High Yield |
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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