Correlation Between Putnam Global and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Putnam Global and Metropolitan West 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 Global and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Global Financials and Metropolitan West Total, you can compare the effects of market volatilities on Putnam Global and Metropolitan West 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 Global with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and Metropolitan West.
Diversification Opportunities for Putnam Global and Metropolitan West
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Putnam and Metropolitan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Financials and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total and Putnam Global 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 Global Financials are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Putnam Global i.e., Putnam Global and Metropolitan West go up and down completely randomly.
Pair Corralation between Putnam Global and Metropolitan West
Assuming the 90 days horizon Putnam Global Financials is expected to generate 1.23 times more return on investment than Metropolitan West. However, Putnam Global is 1.23 times more volatile than Metropolitan West Total. It trades about 0.07 of its potential returns per unit of risk. Metropolitan West Total is currently generating about -0.02 per unit of risk. If you would invest 1,025 in Putnam Global Financials on December 5, 2024 and sell it today you would earn a total of 35.00 from holding Putnam Global Financials or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.36% |
| Values | Daily Returns |
Putnam Global Financials vs. Metropolitan West Total
Performance |
| Timeline |
| Putnam Global Financials |
| Metropolitan West Total |
Putnam Global and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Global and Metropolitan West
The main advantage of trading using opposite Putnam Global and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Global position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Putnam Global vs. Gabelli Global Financial | ||
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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