Correlation Between Putnam Growth and American Beacon
Can any of the company-specific risk be diversified away by investing in both Putnam Growth and American Beacon 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 American Beacon 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 American Beacon Stephens, you can compare the effects of market volatilities on Putnam Growth and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Growth and American Beacon.
Diversification Opportunities for Putnam Growth and American Beacon
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Putnam and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Growth Opportunities and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Stephens has no effect on the direction of Putnam Growth i.e., Putnam Growth and American Beacon go up and down completely randomly.
Pair Corralation between Putnam Growth and American Beacon
Assuming the 90 days horizon Putnam Growth is expected to generate 1.62 times less return on investment than American Beacon. But when comparing it to its historical volatility, Putnam Growth Opportunities is 1.52 times less risky than American Beacon. It trades about 0.3 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,256 in American Beacon Stephens on September 1, 2024 and sell it today you would earn a total of 126.00 from holding American Beacon Stephens or generate 10.03% 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. American Beacon Stephens
Performance |
| Timeline |
| Putnam Growth Opport |
| American Beacon Stephens |
Putnam Growth and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Growth and American Beacon
The main advantage of trading using opposite Putnam Growth and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Growth position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon'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 |
| American Beacon vs. American Beacon Stephens | American Beacon vs. American Beacon Stephens | American Beacon vs. Alger Small Cap | American Beacon vs. Amg Timessquare Small |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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