Correlation Between M Large and Putnam Floating

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

By analyzing existing cross correlation between M Large Cap and Putnam Floating Rate, you can compare the effects of market volatilities on M Large and Putnam Floating 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 M Large with a short position of Putnam Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Putnam Floating.

Diversification Opportunities for M Large and Putnam Floating

0.8

Correlation Coefficient

M Large  Putnam Floating

Very poor diversification

The 3 months correlation between MTCGX and Putnam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Putnam Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Floating Rate and M Large 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 M Large Cap are associated (or correlated) with Putnam Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Floating Rate has no effect on the direction of M Large i.e., M Large and Putnam Floating go up and down completely randomly.

Pair Corralation between M Large and Putnam Floating

Assuming the 90 days horizon M Large Cap is expected to generate 6.46 times more return on investment than Putnam Floating. However, M Large is 6.46 times more volatile than Putnam Floating Rate. It trades about 0.09 of its potential returns per unit of risk. Putnam Floating Rate is currently generating about 0.2 per unit of risk. If you would invest  2,285  in M Large Cap on September 26, 2024 and sell it today you would earn a total of  1,474  from holding M Large Cap or generate 64.51% return on investment over 90 days.

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

M Large Cap  vs.  Putnam Floating Rate

M Large Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in M Large Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, M Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Floating Rate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Floating Rate are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Putnam Floating

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

The idea behind M Large Cap and Putnam Floating Rate 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.