Correlation Between Putnam Asia and Virtus Convertible

Can any of the company-specific risk be diversified away by investing in both Putnam Asia and Virtus Convertible 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 Virtus Convertible 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 Virtus Convertible, you can compare the effects of market volatilities on Putnam Asia and Virtus Convertible 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 Virtus Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Asia and Virtus Convertible.

Diversification Opportunities for Putnam Asia and Virtus Convertible

0.34

Correlation Coefficient

Putnam Asia  Virtus Convertible

Weak diversification

The 3 months correlation between Putnam and Virtus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Asia Pacific and Virtus Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Convertible 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 Virtus Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Convertible has no effect on the direction of Putnam Asia i.e., Putnam Asia and Virtus Convertible go up and down completely randomly.

Pair Corralation between Putnam Asia and Virtus Convertible

Assuming the 90 days horizon Putnam Asia Pacific is expected to under-perform the Virtus Convertible. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Asia Pacific is 1.57 times less risky than Virtus Convertible. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Virtus Convertible is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,347  in Virtus Convertible on September 15, 2024 and sell it today you would earn a total of  348.00  from holding Virtus Convertible or generate 10.4% 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.  Virtus Convertible

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.

Virtus Convertible

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Convertible are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Virtus Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Asia and Virtus Convertible

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

The idea behind Putnam Asia Pacific and Virtus Convertible 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.