Correlation Between Rational Defensive and Putnam Global

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

By analyzing existing cross correlation between Rational Defensive Growth and Putnam Global Equity, you can compare the effects of market volatilities on Rational Defensive and Putnam Global 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 Rational Defensive with a short position of Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Putnam Global.

Diversification Opportunities for Rational Defensive and Putnam Global

-0.54

Correlation Coefficient

Rational Defensive  Putnam Global

Excellent diversification

The 3 months correlation between Rational and Putnam is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Putnam Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Equity and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Equity has no effect on the direction of Rational Defensive i.e., Rational Defensive and Putnam Global go up and down completely randomly.

Pair Corralation between Rational Defensive and Putnam Global

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.15 times more return on investment than Putnam Global. However, Rational Defensive is 1.15 times more volatile than Putnam Global Equity. It trades about 0.06 of its potential returns per unit of risk. Putnam Global Equity is currently generating about -0.11 per unit of risk. If you would invest  4,045  in Rational Defensive Growth on September 27, 2024 and sell it today you would earn a total of  46.00  from holding Rational Defensive Growth or generate 1.14% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Putnam Global Equity

Rational Defensive Growth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putnam Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Rational Defensive and Putnam Global

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

The idea behind Rational Defensive Growth and Putnam Global Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.