Correlation Between Putnam Equity and Small Cap
Can any of the company-specific risk be diversified away by investing in both Putnam Equity and Small Cap 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 Equity and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Equity Income and Small Cap Growth, you can compare the effects of market volatilities on Putnam Equity and Small Cap 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 Equity with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Equity and Small Cap.
Diversification Opportunities for Putnam Equity and Small Cap
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Putnam and SMALL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Equity Income and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Putnam Equity 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 Equity Income are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Putnam Equity i.e., Putnam Equity and Small Cap go up and down completely randomly.
Pair Corralation between Putnam Equity and Small Cap
Assuming the 90 days horizon Putnam Equity is expected to generate 1.83 times less return on investment than Small Cap. But when comparing it to its historical volatility, Putnam Equity Income is 1.43 times less risky than Small Cap. It trades about 0.21 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,910 in Small Cap Growth on October 25, 2024 and sell it today you would earn a total of 96.00 from holding Small Cap Growth or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Equity Income vs. Small Cap Growth
Performance |
| Timeline |
| Putnam Equity Income |
| Small Cap Growth |
Putnam Equity and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Equity and Small Cap
The main advantage of trading using opposite Putnam Equity and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Equity position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| 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 |
| Small Cap vs. Putnam International Capital | Small Cap vs. Putnam Small Cap | Small Cap vs. Putnam Equity Income | Small Cap vs. Putnam Growth Opportunities |
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 CEOs Directory module to screen CEOs from public companies around the world.
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