Correlation Between Putnam Small and California Bond
Can any of the company-specific risk be diversified away by investing in both Putnam Small and California Bond 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 California Bond 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 California Bond Fund, you can compare the effects of market volatilities on Putnam Small and California Bond 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 California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Small and California Bond.
Diversification Opportunities for Putnam Small and California Bond
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Putnam and California is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond 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 California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Putnam Small i.e., Putnam Small and California Bond go up and down completely randomly.
Pair Corralation between Putnam Small and California Bond
Assuming the 90 days horizon Putnam Small Cap is expected to generate 6.75 times more return on investment than California Bond. However, Putnam Small is 6.75 times more volatile than California Bond Fund. It trades about 0.1 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.44 per unit of risk. If you would invest 1,649 in Putnam Small Cap on September 13, 2024 and sell it today you would earn a total of 24.00 from holding Putnam Small Cap or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Putnam Small Cap vs. California Bond Fund
Performance |
| Timeline |
| Putnam Small Cap |
| California Bond |
Putnam Small and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Small and California Bond
The main advantage of trading using opposite Putnam Small and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Small position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond'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 High Yield |
| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Victory Diversified Stock | California Bond vs. Intermediate Term Bond 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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