Correlation Between Putnam Convertible and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Putnam Convertible and Franklin Lifesmart 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 Convertible and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Convertible Incm Gwth and Franklin Lifesmart 2045, you can compare the effects of market volatilities on Putnam Convertible and Franklin Lifesmart 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 Convertible with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Convertible and Franklin Lifesmart.
Diversification Opportunities for Putnam Convertible and Franklin Lifesmart
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Putnam and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 and Putnam Convertible 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 Convertible Incm Gwth are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2045 has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Putnam Convertible and Franklin Lifesmart
Assuming the 90 days horizon Putnam Convertible is expected to generate 1.5 times less return on investment than Franklin Lifesmart. But when comparing it to its historical volatility, Putnam Convertible Incm Gwth is 1.29 times less risky than Franklin Lifesmart. It trades about 0.09 of its potential returns per unit of risk. Franklin Lifesmart 2045 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,164 in Franklin Lifesmart 2045 on September 12, 2024 and sell it today you would earn a total of 470.00 from holding Franklin Lifesmart 2045 or generate 40.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Putnam Convertible Incm Gwth vs. Franklin Lifesmart 2045
Performance |
| Timeline |
| Putnam Convertible Incm |
| Franklin Lifesmart 2045 |
Putnam Convertible and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Convertible and Franklin Lifesmart
The main advantage of trading using opposite Putnam Convertible and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Convertible position performs unexpectedly, Franklin Lifesmart 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 Franklin Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.| Putnam Convertible vs. Sp Midcap Index | Putnam Convertible vs. Pnc Emerging Markets | Putnam Convertible vs. Ep Emerging Markets | Putnam Convertible vs. Ab All Market |
| Franklin Lifesmart vs. Valic Company I | Franklin Lifesmart vs. Boston Partners Small | Franklin Lifesmart vs. Mutual Of America | Franklin Lifesmart vs. Royce Opportunity Fund |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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