Correlation Between Putnam Focused and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Putnam Focused and Overlay Shares 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 Focused and Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Focused Large and Overlay Shares Hedged, you can compare the effects of market volatilities on Putnam Focused and Overlay Shares 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 Focused with a short position of Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Focused and Overlay Shares.
Diversification Opportunities for Putnam Focused and Overlay Shares
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Putnam and Overlay is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and Overlay Shares Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Hedged and Putnam Focused 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 Focused Large are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Hedged has no effect on the direction of Putnam Focused i.e., Putnam Focused and Overlay Shares go up and down completely randomly.
Pair Corralation between Putnam Focused and Overlay Shares
Given the investment horizon of 90 days Putnam Focused Large is expected to generate 1.4 times more return on investment than Overlay Shares. However, Putnam Focused is 1.4 times more volatile than Overlay Shares Hedged. It trades about 0.12 of its potential returns per unit of risk. Overlay Shares Hedged is currently generating about 0.17 per unit of risk. If you would invest 3,568 in Putnam Focused Large on September 1, 2024 and sell it today you would earn a total of 431.00 from holding Putnam Focused Large or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Putnam Focused Large vs. Overlay Shares Hedged
Performance |
| Timeline |
| Putnam Focused Large |
| Overlay Shares Hedged |
Putnam Focused and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Putnam Focused and Overlay Shares
The main advantage of trading using opposite Putnam Focused and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Focused position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.The idea behind Putnam Focused Large and Overlay Shares Hedged pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Overlay Shares vs. Vanguard Total Stock | Overlay Shares vs. SPDR SP 500 | Overlay Shares vs. iShares Core SP | Overlay Shares vs. Vanguard Dividend Appreciation |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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