Correlation Between IShares Core and Putnam Sustainable

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

By analyzing existing cross correlation between iShares Core SP and Putnam Sustainable Leaders, you can compare the effects of market volatilities on IShares Core and Putnam Sustainable 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 IShares Core with a short position of Putnam Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Putnam Sustainable.

Diversification Opportunities for IShares Core and Putnam Sustainable

0.94

Correlation Coefficient

IShares Core  Putnam Sustainable

Almost no diversification

The 3 months correlation between IShares and Putnam is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Putnam Sustainable Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable and IShares Core 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 iShares Core SP are associated (or correlated) with Putnam Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable has no effect on the direction of IShares Core i.e., IShares Core and Putnam Sustainable go up and down completely randomly.

Pair Corralation between IShares Core and Putnam Sustainable

Given the investment horizon of 90 days iShares Core SP is expected to generate 1.31 times more return on investment than Putnam Sustainable. However, IShares Core is 1.31 times more volatile than Putnam Sustainable Leaders. It trades about 0.19 of its potential returns per unit of risk. Putnam Sustainable Leaders is currently generating about 0.17 per unit of risk. If you would invest  12,422  in iShares Core SP on September 2, 2024 and sell it today you would earn a total of  1,478  from holding iShares Core SP or generate 11.9% return on investment over 90 days.

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

iShares Core SP  vs.  Putnam Sustainable Leaders

iShares Core SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putnam Sustainable

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Sustainable Leaders are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Putnam Sustainable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Putnam Sustainable

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

The idea behind iShares Core SP and Putnam Sustainable Leaders 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.