Correlation Between Putnam Tax and Putnam Income
Can any of the company-specific risk be diversified away by investing in both Putnam Tax and Putnam Income 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 Tax and Putnam Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Tax Exempt and Putnam Income Fund, you can compare the effects of market volatilities on Putnam Tax and Putnam Income 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 Tax with a short position of Putnam Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Tax and Putnam Income.
Diversification Opportunities for Putnam Tax and Putnam Income
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Putnam and Putnam is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Tax Exempt and Putnam Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Income and Putnam Tax 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 Tax Exempt are associated (or correlated) with Putnam Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Income has no effect on the direction of Putnam Tax i.e., Putnam Tax and Putnam Income go up and down completely randomly.
Pair Corralation between Putnam Tax and Putnam Income
Assuming the 90 days horizon Putnam Tax Exempt is expected to generate 0.76 times more return on investment than Putnam Income. However, Putnam Tax Exempt is 1.32 times less risky than Putnam Income. It trades about 0.11 of its potential returns per unit of risk. Putnam Income Fund is currently generating about 0.08 per unit of risk. If you would invest 761.00 in Putnam Tax Exempt on August 24, 2024 and sell it today you would earn a total of 27.00 from holding Putnam Tax Exempt or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Tax Exempt vs. Putnam Income Fund
Performance |
| Timeline |
| Putnam Tax Exempt |
| Putnam Income |
Putnam Tax and Putnam Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Tax and Putnam Income
The main advantage of trading using opposite Putnam Tax and Putnam Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Tax position performs unexpectedly, Putnam Income 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 Income will offset losses from the drop in Putnam Income's long position.| Putnam Tax vs. Franklin Gold Precious | Putnam Tax vs. James Balanced Golden | Putnam Tax vs. Invesco Gold Special | Putnam Tax vs. Global Gold Fund |
| Putnam Income vs. Total Return Fund | Putnam Income vs. Strategic Advisers Fidelity | Putnam Income vs. Dodge Income Fund | Putnam Income vs. Metropolitan West Total |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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