Correlation Between Putnam Convertible and Pace High
Can any of the company-specific risk be diversified away by investing in both Putnam Convertible and Pace High 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 Pace High 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 Pace High Yield, you can compare the effects of market volatilities on Putnam Convertible and Pace High 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 Pace High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Convertible and Pace High.
Diversification Opportunities for Putnam Convertible and Pace High
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Putnam and Pace is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Securities and Pace High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace High Yield 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 Pace High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace High Yield has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Pace High go up and down completely randomly.
Pair Corralation between Putnam Convertible and Pace High
Assuming the 90 days horizon Putnam Convertible Securities is expected to generate 3.05 times more return on investment than Pace High. However, Putnam Convertible is 3.05 times more volatile than Pace High Yield. It trades about 0.16 of its potential returns per unit of risk. Pace High Yield is currently generating about 0.06 per unit of risk. If you would invest 2,608 in Putnam Convertible Securities on November 5, 2024 and sell it today you would earn a total of 49.00 from holding Putnam Convertible Securities or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Convertible Securities vs. Pace High Yield
Performance |
| Timeline |
| Putnam Convertible |
| Pace High Yield |
Putnam Convertible and Pace High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Convertible and Pace High
The main advantage of trading using opposite Putnam Convertible and Pace High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Convertible position performs unexpectedly, Pace High 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 Pace High will offset losses from the drop in Pace High's long position.The idea behind Putnam Convertible Securities and Pace High Yield 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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