Correlation Between Extended Market and Putnam High
Can any of the company-specific risk be diversified away by investing in both Extended Market and Putnam High 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 Extended Market and Putnam High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Putnam High Yield, you can compare the effects of market volatilities on Extended Market and Putnam High 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 Extended Market with a short position of Putnam High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Putnam High.
Diversification Opportunities for Extended Market and Putnam High
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and Putnam is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Putnam High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam High Yield and Extended Market 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 Extended Market Index are associated (or correlated) with Putnam High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam High Yield has no effect on the direction of Extended Market i.e., Extended Market and Putnam High go up and down completely randomly.
Pair Corralation between Extended Market and Putnam High
Assuming the 90 days horizon Extended Market Index is expected to under-perform the Putnam High. In addition to that, Extended Market is 4.27 times more volatile than Putnam High Yield. It trades about -0.32 of its total potential returns per unit of risk. Putnam High Yield is currently generating about -0.24 per unit of volatility. If you would invest 543.00 in Putnam High Yield on October 7, 2024 and sell it today you would lose (17.00) from holding Putnam High Yield or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Putnam High Yield
Performance |
| Timeline |
| Extended Market Index |
| Putnam High Yield |
Extended Market and Putnam High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Putnam High
The main advantage of trading using opposite Extended Market and Putnam High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Putnam High 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 High will offset losses from the drop in Putnam High's long position.| Extended Market vs. Ab Small Cap | Extended Market vs. Champlain Small | Extended Market vs. Touchstone Small Cap | Extended Market vs. Ab Small Cap |
| Putnam High vs. Kinetics Market Opportunities | Putnam High vs. T Rowe Price | Putnam High vs. Alphacentric Hedged Market | Putnam High vs. Inverse Emerging Markets |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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