Correlation Between Putnam Small and Putnam Sustainable
Can any of the company-specific risk be diversified away by investing in both Putnam Small and Putnam Sustainable 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 Sustainable 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 Sustainable Future, you can compare the effects of market volatilities on Putnam Small and Putnam Sustainable 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 Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Small and Putnam Sustainable.
Diversification Opportunities for Putnam Small and Putnam Sustainable
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Putnam and Putnam is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and Putnam Sustainable Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable Future 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 Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable Future has no effect on the direction of Putnam Small i.e., Putnam Small and Putnam Sustainable go up and down completely randomly.
Pair Corralation between Putnam Small and Putnam Sustainable
Assuming the 90 days horizon Putnam Small Cap is expected to generate 1.05 times more return on investment than Putnam Sustainable. However, Putnam Small is 1.05 times more volatile than Putnam Sustainable Future. It trades about 0.05 of its potential returns per unit of risk. Putnam Sustainable Future is currently generating about 0.04 per unit of risk. If you would invest 4,080 in Putnam Small Cap on December 7, 2024 and sell it today you would earn a total of 1,252 from holding Putnam Small Cap or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Small Cap vs. Putnam Sustainable Future
Performance |
| Timeline |
| Putnam Small Cap |
| Putnam Sustainable Future |
Putnam Small and Putnam Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Small and Putnam Sustainable
The main advantage of trading using opposite Putnam Small and Putnam Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Small position performs unexpectedly, Putnam Sustainable 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 Sustainable will offset losses from the drop in Putnam Sustainable's long position.| Putnam Small vs. Global Diversified Income | ||
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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