Correlation Between Prudential High and Putnam Convertible
Can any of the company-specific risk be diversified away by investing in both Prudential High and Putnam Convertible 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 Prudential High and Putnam Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential High Yield and Putnam Convertible Securities, you can compare the effects of market volatilities on Prudential High and Putnam Convertible 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 Prudential High with a short position of Putnam Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Putnam Convertible.
Diversification Opportunities for Prudential High and Putnam Convertible
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Putnam is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Putnam Convertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Convertible and Prudential High 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 Prudential High Yield are associated (or correlated) with Putnam Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Convertible has no effect on the direction of Prudential High i.e., Prudential High and Putnam Convertible go up and down completely randomly.
Pair Corralation between Prudential High and Putnam Convertible
Assuming the 90 days horizon Prudential High is expected to generate 3.15 times less return on investment than Putnam Convertible. But when comparing it to its historical volatility, Prudential High Yield is 3.51 times less risky than Putnam Convertible. It trades about 0.27 of its potential returns per unit of risk. Putnam Convertible Securities is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,572 in Putnam Convertible Securities on November 3, 2024 and sell it today you would earn a total of 85.00 from holding Putnam Convertible Securities or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. Putnam Convertible Securities
Performance |
| Timeline |
| Prudential High Yield |
| Putnam Convertible |
Prudential High and Putnam Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Putnam Convertible
The main advantage of trading using opposite Prudential High and Putnam Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Putnam Convertible 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 Convertible will offset losses from the drop in Putnam Convertible's long position.| Prudential High vs. Technology Ultrasector Profund | Prudential High vs. Columbia Global Technology | Prudential High vs. Specialized Technology Fund | Prudential High vs. Dreyfus Technology Growth |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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