Correlation Between Needham Small and Putnam Equity
Can any of the company-specific risk be diversified away by investing in both Needham Small and Putnam Equity 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 Needham Small and Putnam Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Needham Small Cap and Putnam Equity Income, you can compare the effects of market volatilities on Needham Small and Putnam Equity 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 Needham Small with a short position of Putnam Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Putnam Equity.
Diversification Opportunities for Needham Small and Putnam Equity
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Needham and Putnam is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income and Needham Small 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 Needham Small Cap are associated (or correlated) with Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of Needham Small i.e., Needham Small and Putnam Equity go up and down completely randomly.
Pair Corralation between Needham Small and Putnam Equity
Assuming the 90 days horizon Needham Small is expected to generate 2.27 times less return on investment than Putnam Equity. In addition to that, Needham Small is 2.69 times more volatile than Putnam Equity Income. It trades about 0.02 of its total potential returns per unit of risk. Putnam Equity Income is currently generating about 0.14 per unit of volatility. If you would invest 3,462 in Putnam Equity Income on September 1, 2024 and sell it today you would earn a total of 432.00 from holding Putnam Equity Income or generate 12.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Needham Small Cap vs. Putnam Equity Income
Performance |
| Timeline |
| Needham Small Cap |
| Putnam Equity Income |
Needham Small and Putnam Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Putnam Equity
The main advantage of trading using opposite Needham Small and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Putnam Equity 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 Equity will offset losses from the drop in Putnam Equity's long position.| Needham Small vs. Needham Aggressive Growth | Needham Small vs. Needham Growth Fund | Needham Small vs. Baron Opportunity Fund | Needham Small vs. Jacob Micro Cap |
| Putnam Equity vs. Putnam Growth Opportunities | Putnam Equity vs. Putnam International Equity | Putnam Equity vs. George Putnam Fund | Putnam Equity vs. Putnam Multi Cap Growth |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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