Correlation Between Putnam Convertible and Jpmorgan International
Can any of the company-specific risk be diversified away by investing in both Putnam Convertible and Jpmorgan International 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 Putnam Convertible and Jpmorgan International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Convertible Securities and Jpmorgan International Value, you can compare the effects of market volatilities on Putnam Convertible and Jpmorgan International 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 Putnam Convertible with a short position of Jpmorgan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Convertible and Jpmorgan International.
Diversification Opportunities for Putnam Convertible and Jpmorgan International
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Putnam and Jpmorgan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Securities and Jpmorgan International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan International and Putnam Convertible 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 Putnam Convertible Securities are associated (or correlated) with Jpmorgan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan International has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Jpmorgan International go up and down completely randomly.
Pair Corralation between Putnam Convertible and Jpmorgan International
Assuming the 90 days horizon Putnam Convertible is expected to generate 2.05 times less return on investment than Jpmorgan International. But when comparing it to its historical volatility, Putnam Convertible Securities is 1.24 times less risky than Jpmorgan International. It trades about 0.18 of its potential returns per unit of risk. Jpmorgan International Value is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,423 in Jpmorgan International Value on November 4, 2024 and sell it today you would earn a total of 66.00 from holding Jpmorgan International Value or generate 4.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Convertible Securities vs. Jpmorgan International Value
Performance |
| Timeline |
| Putnam Convertible |
| Jpmorgan International |
Putnam Convertible and Jpmorgan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Convertible and Jpmorgan International
The main advantage of trading using opposite Putnam Convertible and Jpmorgan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Convertible position performs unexpectedly, Jpmorgan International 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 Jpmorgan International will offset losses from the drop in Jpmorgan International's long position.The idea behind Putnam Convertible Securities and Jpmorgan International Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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