Correlation Between China Health and Putnam Master

Can any of the company-specific risk be diversified away by investing in both China Health and Putnam Master 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 China Health and Putnam Master into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Health Management and Putnam Master Intermediate, you can compare the effects of market volatilities on China Health and Putnam Master 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 China Health with a short position of Putnam Master. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and Putnam Master.

Diversification Opportunities for China Health and Putnam Master

0.02

Correlation Coefficient

China Health  Putnam Master

Significant diversification

The 3 months correlation between China and Putnam is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and Putnam Master Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Master Interm and China Health 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 China Health Management are associated (or correlated) with Putnam Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Master Interm has no effect on the direction of China Health i.e., China Health and Putnam Master go up and down completely randomly.

Pair Corralation between China Health and Putnam Master

Given the investment horizon of 90 days China Health Management is expected to generate 15.5 times more return on investment than Putnam Master. However, China Health is 15.5 times more volatile than Putnam Master Intermediate. It trades about 0.05 of its potential returns per unit of risk. Putnam Master Intermediate is currently generating about 0.05 per unit of risk. If you would invest  1.79  in China Health Management on September 14, 2024 and sell it today you would lose (1.39) from holding China Health Management or give up 77.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Health Management  vs.  Putnam Master Intermediate

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Putnam Master Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Master Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Putnam Master is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with China Health and Putnam Master

The main advantage of trading using opposite China Health and Putnam Master positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Health position performs unexpectedly, Putnam Master 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 Master will offset losses from the drop in Putnam Master's long position.

The idea behind China Health Management and Putnam Master Intermediate 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.