Correlation Between Putnam U and Inverse Government

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Can any of the company-specific risk be diversified away by investing in both Putnam U and Inverse Government 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 U and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam U S and Inverse Government Long, you can compare the effects of market volatilities on Putnam U and Inverse Government 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 U with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam U and Inverse Government.

Diversification Opportunities for Putnam U and Inverse Government

-0.89
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Putnam and Inverse is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Putnam U S and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Putnam U 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 U S are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Putnam U i.e., Putnam U and Inverse Government go up and down completely randomly.

Pair Corralation between Putnam U and Inverse Government

Assuming the 90 days horizon Putnam U S is expected to generate 0.34 times more return on investment than Inverse Government. However, Putnam U S is 2.95 times less risky than Inverse Government. It trades about 0.21 of its potential returns per unit of risk. Inverse Government Long is currently generating about -0.05 per unit of risk. If you would invest  833.00  in Putnam U S on September 12, 2024 and sell it today you would earn a total of  12.00  from holding Putnam U S or generate 1.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Putnam U S  vs.  Inverse Government Long

 Performance 
       Timeline  
Putnam U S 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Putnam U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Putnam U is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Inverse Government Long 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putnam U and Inverse Government Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Putnam U and Inverse Government

The main advantage of trading using opposite Putnam U and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam U position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.
The idea behind Putnam U S and Inverse Government Long 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.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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