Correlation Between Putnam Equity and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Putnam Equity and Franklin Small 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 Franklin Small 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 Franklin Small Cap, you can compare the effects of market volatilities on Putnam Equity and Franklin Small 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 Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Equity and Franklin Small.
Diversification Opportunities for Putnam Equity and Franklin Small
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Putnam and Franklin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Equity Income and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap 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 Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Cap has no effect on the direction of Putnam Equity i.e., Putnam Equity and Franklin Small go up and down completely randomly.
Pair Corralation between Putnam Equity and Franklin Small
Assuming the 90 days horizon Putnam Equity is expected to generate 1.72 times less return on investment than Franklin Small. But when comparing it to its historical volatility, Putnam Equity Income is 1.38 times less risky than Franklin Small. It trades about 0.21 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,609 in Franklin Small Cap on October 25, 2024 and sell it today you would earn a total of 76.00 from holding Franklin Small Cap or generate 4.72% 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. Franklin Small Cap
Performance |
| Timeline |
| Putnam Equity Income |
| Franklin Small Cap |
Putnam Equity and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Equity and Franklin Small
The main advantage of trading using opposite Putnam Equity and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Equity position performs unexpectedly, Franklin Small 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 Franklin Small will offset losses from the drop in Franklin Small'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 |
| Franklin Small vs. Putnam International Capital | Franklin Small vs. Putnam Small Cap | Franklin Small vs. Putnam Equity Income | Franklin Small 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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