Correlation Between Small Cap and Putnam Convertible
Can any of the company-specific risk be diversified away by investing in both Small Cap and Putnam Convertible 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 Small Cap and Putnam Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Putnam Convertible Securities, you can compare the effects of market volatilities on Small Cap and Putnam Convertible 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 Small Cap with a short position of Putnam Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Putnam Convertible.
Diversification Opportunities for Small Cap and Putnam Convertible
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Putnam is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Putnam Convertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Convertible and Small Cap 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 Small Cap Stock are associated (or correlated) with Putnam Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Convertible has no effect on the direction of Small Cap i.e., Small Cap and Putnam Convertible go up and down completely randomly.
Pair Corralation between Small Cap and Putnam Convertible
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.43 times more return on investment than Putnam Convertible. However, Small Cap is 1.43 times more volatile than Putnam Convertible Securities. It trades about 0.13 of its potential returns per unit of risk. Putnam Convertible Securities is currently generating about 0.18 per unit of risk. If you would invest 1,357 in Small Cap Stock on October 23, 2024 and sell it today you would earn a total of 30.00 from holding Small Cap Stock or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Small Cap Stock vs. Putnam Convertible Securities
Performance |
| Timeline |
| Small Cap Stock |
| Putnam Convertible |
Small Cap and Putnam Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Putnam Convertible
The main advantage of trading using opposite Small Cap and Putnam Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Putnam Convertible 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 Convertible will offset losses from the drop in Putnam Convertible's long position.| Small Cap vs. Baron Health Care | Small Cap vs. Vanguard Health Care | Small Cap vs. Alphacentric Lifesci Healthcare | Small Cap vs. Eventide Healthcare Life |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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