Correlation Between Putnam Asia and New Economy

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

By analyzing existing cross correlation between Putnam Asia Pacific and New Economy Fund, you can compare the effects of market volatilities on Putnam Asia and New Economy 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 Putnam Asia with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Asia and New Economy.

Diversification Opportunities for Putnam Asia and New Economy

0.24

Correlation Coefficient

Putnam Asia  New Economy

Modest diversification

The 3 months correlation between Putnam and New is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Asia Pacific and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Putnam Asia 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 Putnam Asia Pacific are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Putnam Asia i.e., Putnam Asia and New Economy go up and down completely randomly.

Pair Corralation between Putnam Asia and New Economy

Assuming the 90 days horizon Putnam Asia Pacific is expected to under-perform the New Economy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Asia Pacific is 2.25 times less risky than New Economy. The mutual fund trades about -0.06 of its potential returns per unit of risk. The New Economy Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,392  in New Economy Fund on September 15, 2024 and sell it today you would earn a total of  520.00  from holding New Economy Fund or generate 8.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Putnam Asia Pacific  vs.  New Economy Fund

Putnam Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Asia Pacific has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putnam Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New Economy Fund

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Economy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, New Economy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Asia and New Economy

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

The idea behind Putnam Asia Pacific and New Economy Fund 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.