Correlation Between Nasdaq and Putnam Dynamic

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

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

Diversification Opportunities for Nasdaq and Putnam Dynamic

0.55

Correlation Coefficient

Nasdaq  Putnam Dynamic

Very weak diversification

The 3 months correlation between Nasdaq and Putnam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Putnam Dynamic Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Dynamic Asset and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Putnam Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Dynamic Asset has no effect on the direction of Nasdaq i.e., Nasdaq and Putnam Dynamic go up and down completely randomly.

Pair Corralation between Nasdaq and Putnam Dynamic

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.94 times more return on investment than Putnam Dynamic. However, Nasdaq is 1.94 times more volatile than Putnam Dynamic Asset. It trades about 0.05 of its potential returns per unit of risk. Putnam Dynamic Asset is currently generating about 0.07 per unit of risk. If you would invest  5,951  in Nasdaq Inc on September 20, 2024 and sell it today you would earn a total of  1,796  from holding Nasdaq Inc or generate 30.18% return on investment over 90 days.

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

Nasdaq Inc  vs.  Putnam Dynamic Asset

Nasdaq Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Putnam Dynamic Asset

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Putnam Dynamic Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 Nasdaq and Putnam Dynamic

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

The idea behind Nasdaq Inc and Putnam Dynamic Asset 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.