Correlation Between Commodities Strategy and Putnam Diversified
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy and Putnam Diversified 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 Commodities Strategy and Putnam Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commodities Strategy Fund and Putnam Diversified Income, you can compare the effects of market volatilities on Commodities Strategy and Putnam Diversified 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 Commodities Strategy with a short position of Putnam Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Putnam Diversified.
Diversification Opportunities for Commodities Strategy and Putnam Diversified
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Commodities and PUTNAM is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Putnam Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Diversified Income and Commodities Strategy 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 Commodities Strategy Fund are associated (or correlated) with Putnam Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Diversified Income has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Putnam Diversified go up and down completely randomly.
Pair Corralation between Commodities Strategy and Putnam Diversified
Assuming the 90 days horizon Commodities Strategy is expected to generate 2.2 times less return on investment than Putnam Diversified. In addition to that, Commodities Strategy is 4.0 times more volatile than Putnam Diversified Income. It trades about 0.01 of its total potential returns per unit of risk. Putnam Diversified Income is currently generating about 0.07 per unit of volatility. If you would invest 492.00 in Putnam Diversified Income on September 3, 2024 and sell it today you would earn a total of 52.00 from holding Putnam Diversified Income or generate 10.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Putnam Diversified Income
Performance |
| Timeline |
| Commodities Strategy |
| Putnam Diversified Income |
Commodities Strategy and Putnam Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Putnam Diversified
The main advantage of trading using opposite Commodities Strategy and Putnam Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy position performs unexpectedly, Putnam Diversified 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 Diversified will offset losses from the drop in Putnam Diversified's long position.The idea behind Commodities Strategy Fund and Putnam Diversified Income 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.
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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