Correlation Between Jpmorgan Strategic and Putnam Diversified

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

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

Diversification Opportunities for Jpmorgan Strategic and Putnam Diversified

-0.66

Correlation Coefficient

Jpmorgan Strategic  Putnam Diversified

Excellent diversification

The 3 months correlation between Jpmorgan and Putnam is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Strategic Income and Putnam Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Diversified Income and Jpmorgan Strategic 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 Jpmorgan Strategic Income are associated (or correlated) with Putnam Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Diversified Income has no effect on the direction of Jpmorgan Strategic i.e., Jpmorgan Strategic and Putnam Diversified go up and down completely randomly.

Pair Corralation between Jpmorgan Strategic and Putnam Diversified

Assuming the 90 days horizon Jpmorgan Strategic is expected to generate 1.29 times less return on investment than Putnam Diversified. But when comparing it to its historical volatility, Jpmorgan Strategic Income is 5.08 times less risky than Putnam Diversified. It trades about 0.3 of its potential returns per unit of risk. Putnam Diversified Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  488.00  in Putnam Diversified Income on September 13, 2024 and sell it today you would earn a total of  55.00  from holding Putnam Diversified Income or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Jpmorgan Strategic Income  vs.  Putnam Diversified Income

Jpmorgan Strategic Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Strategic Income are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jpmorgan Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Diversified Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Diversified Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jpmorgan Strategic and Putnam Diversified

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

The idea behind Jpmorgan Strategic Income and Putnam Diversified Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.