Correlation Between Microsoft and Putnam Growth
Can any of the company-specific risk be diversified away by investing in both Microsoft and Putnam Growth 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 Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Putnam Growth Opportunities, you can compare the effects of market volatilities on Microsoft and Putnam Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Putnam Growth.
Diversification Opportunities for Microsoft and Putnam Growth
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Putnam is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Putnam Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Growth Opport 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Growth Opport has no effect on the direction of Microsoft i.e., Microsoft and Putnam Growth go up and down completely randomly.
Pair Corralation between Microsoft and Putnam Growth
Given the investment horizon of 90 days Microsoft is expected to generate 1.41 times more return on investment than Putnam Growth. However, Microsoft is 1.41 times more volatile than Putnam Growth Opportunities. It trades about 0.09 of its potential returns per unit of risk. Putnam Growth Opportunities is currently generating about 0.1 per unit of risk. If you would invest 23,466 in Microsoft on September 3, 2024 and sell it today you would earn a total of 18,880 from holding Microsoft or generate 80.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Putnam Growth Opportunities
Performance |
| Timeline |
| Microsoft |
| Putnam Growth Opport |
Microsoft and Putnam Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Putnam Growth
The main advantage of trading using opposite Microsoft and Putnam Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Putnam Growth 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 Growth will offset losses from the drop in Putnam Growth's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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