Correlation Between Putnam Growth and Small Cap
Can any of the company-specific risk be diversified away by investing in both Putnam Growth and Small Cap 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 Growth and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Growth Opportunities and Small Cap Growth, you can compare the effects of market volatilities on Putnam Growth and Small Cap 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 Growth with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Growth and Small Cap.
Diversification Opportunities for Putnam Growth and Small Cap
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Putnam and SMALL is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Growth Opportunities and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Putnam Growth 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 Growth Opportunities are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Putnam Growth i.e., Putnam Growth and Small Cap go up and down completely randomly.
Pair Corralation between Putnam Growth and Small Cap
Assuming the 90 days horizon Putnam Growth is expected to generate 1.54 times less return on investment than Small Cap. But when comparing it to its historical volatility, Putnam Growth Opportunities is 1.18 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,872 in Small Cap Growth on August 29, 2024 and sell it today you would earn a total of 150.00 from holding Small Cap Growth or generate 8.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Growth Opportunities vs. Small Cap Growth
Performance |
| Timeline |
| Putnam Growth Opport |
| Small Cap Growth |
Putnam Growth and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Growth and Small Cap
The main advantage of trading using opposite Putnam Growth and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Growth position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Putnam Growth vs. Putnam Equity Income | Putnam Growth vs. Putnam Multi Cap Growth | Putnam Growth vs. Putnam Global Health | Putnam Growth vs. Putnam International Equity |
| Small Cap vs. Putnam Equity Income | Small Cap vs. Putnam Growth Opportunities | Small Cap vs. HUMANA INC | Small Cap vs. Aquagold International |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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