Correlation Between First Trust and Putnam Focused
Can any of the company-specific risk be diversified away by investing in both First Trust and Putnam Focused 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 First Trust and Putnam Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange and Putnam Focused Large, you can compare the effects of market volatilities on First Trust and Putnam Focused 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 First Trust with a short position of Putnam Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Putnam Focused.
Diversification Opportunities for First Trust and Putnam Focused
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Putnam is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large and First Trust 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 First Trust Exchange are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of First Trust i.e., First Trust and Putnam Focused go up and down completely randomly.
Pair Corralation between First Trust and Putnam Focused
Given the investment horizon of 90 days First Trust is expected to generate 1.67 times less return on investment than Putnam Focused. But when comparing it to its historical volatility, First Trust Exchange is 1.52 times less risky than Putnam Focused. It trades about 0.12 of its potential returns per unit of risk. Putnam Focused Large is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,777 in Putnam Focused Large on September 2, 2024 and sell it today you would earn a total of 1,222 from holding Putnam Focused Large or generate 44.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange vs. Putnam Focused Large
Performance |
| Timeline |
| First Trust Exchange |
| Putnam Focused Large |
First Trust and Putnam Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Putnam Focused
The main advantage of trading using opposite First Trust and Putnam Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Putnam Focused 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 Putnam Focused will offset losses from the drop in Putnam Focused's long position.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. FT Cboe Vest | First Trust vs. FT Cboe Vest |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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