Correlation Between MFS High and Putnam Master

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

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

Diversification Opportunities for MFS High and Putnam Master

0.84

Correlation Coefficient

MFS High  Putnam Master

Very poor diversification

The 3 months correlation between MFS and Putnam is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income 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 MFS High 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 MFS High Income 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 MFS High i.e., MFS High and Putnam Master go up and down completely randomly.

Pair Corralation between MFS High and Putnam Master

Considering the 90-day investment horizon MFS High Income is expected to under-perform the Putnam Master. In addition to that, MFS High is 1.12 times more volatile than Putnam Master Intermediate. It trades about -0.03 of its total potential returns per unit of risk. Putnam Master Intermediate is currently generating about -0.02 per unit of volatility. If you would invest  335.00  in Putnam Master Intermediate on September 14, 2024 and sell it today you would lose (3.00) from holding Putnam Master Intermediate or give up 0.9% of portfolio value over 90 days.

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

MFS High Income  vs.  Putnam Master Intermediate

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the 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 MFS High and Putnam Master

The main advantage of trading using opposite MFS High and Putnam Master positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS High 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 MFS High Income 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.