Correlation Between Putnam Small and Putnam Short
Can any of the company-specific risk be diversified away by investing in both Putnam Small and Putnam Short 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 Small and Putnam Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Small Cap and Putnam Short Duration, you can compare the effects of market volatilities on Putnam Small and Putnam Short 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 Small with a short position of Putnam Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Small and Putnam Short.
Diversification Opportunities for Putnam Small and Putnam Short
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Putnam and Putnam is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and Putnam Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Short Duration and Putnam Small 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 Small Cap are associated (or correlated) with Putnam Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Short Duration has no effect on the direction of Putnam Small i.e., Putnam Small and Putnam Short go up and down completely randomly.
Pair Corralation between Putnam Small and Putnam Short
Assuming the 90 days horizon Putnam Small Cap is expected to generate 12.18 times more return on investment than Putnam Short. However, Putnam Small is 12.18 times more volatile than Putnam Short Duration. It trades about 0.09 of its potential returns per unit of risk. Putnam Short Duration is currently generating about 0.21 per unit of risk. If you would invest 4,965 in Putnam Small Cap on August 28, 2024 and sell it today you would earn a total of 3,119 from holding Putnam Small Cap or generate 62.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Small Cap vs. Putnam Short Duration
Performance |
| Timeline |
| Putnam Small Cap |
| Putnam Short Duration |
Putnam Small and Putnam Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Small and Putnam Short
The main advantage of trading using opposite Putnam Small and Putnam Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Small position performs unexpectedly, Putnam Short 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 Short will offset losses from the drop in Putnam Short's long position.| Putnam Small vs. Putnam Equity Income | Putnam Small vs. Putnam Tax Exempt | Putnam Small vs. Putnam Floating Rate | Putnam Small vs. Putnam Floating Rate |
| Putnam Short vs. Putnam Equity Income | Putnam Short vs. Putnam Tax Exempt | Putnam Short vs. Putnam Floating Rate | Putnam Short vs. Putnam High Yield |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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