Correlation Between Financials Ultrasector and Putman Absolute

Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector and Putman Absolute 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 Financials Ultrasector and Putman Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Financials Ultrasector Profund and Putman Absolute Return, you can compare the effects of market volatilities on Financials Ultrasector and Putman Absolute 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 Financials Ultrasector with a short position of Putman Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Putman Absolute.

Diversification Opportunities for Financials Ultrasector and Putman Absolute

-0.61

Correlation Coefficient

Financials Ultrasector  Putman Absolute

Excellent diversification

The 3 months correlation between Financials and Putman is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Putman Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putman Absolute Return and Financials Ultrasector 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 Financials Ultrasector Profund are associated (or correlated) with Putman Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putman Absolute Return has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Putman Absolute go up and down completely randomly.

Pair Corralation between Financials Ultrasector and Putman Absolute

Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 5.35 times more return on investment than Putman Absolute. However, Financials Ultrasector is 5.35 times more volatile than Putman Absolute Return. It trades about 0.16 of its potential returns per unit of risk. Putman Absolute Return is currently generating about -0.1 per unit of risk. If you would invest  3,768  in Financials Ultrasector Profund on September 13, 2024 and sell it today you would earn a total of  637.00  from holding Financials Ultrasector Profund or generate 16.91% return on investment over 90 days.

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

Financials Ultrasector Profund  vs.  Putman Absolute Return

Financials Ultrasector

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Financials Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Putman Absolute Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putman Absolute Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putman Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financials Ultrasector and Putman Absolute

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

The idea behind Financials Ultrasector Profund and Putman Absolute Return 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.