Correlation Between Putnam High and North Star

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

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

Diversification Opportunities for Putnam High and North Star

0.7

Correlation Coefficient

Putnam High  North Star

Poor diversification

The 3 months correlation between Putnam and North is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Putnam High Income and North Star Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Star Dividend and Putnam High 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 High Income are associated (or correlated) with North Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Star Dividend has no effect on the direction of Putnam High i.e., Putnam High and North Star go up and down completely randomly.

Pair Corralation between Putnam High and North Star

Considering the 90-day investment horizon Putnam High Income is expected to generate 0.93 times more return on investment than North Star. However, Putnam High Income is 1.08 times less risky than North Star. It trades about 0.06 of its potential returns per unit of risk. North Star Dividend is currently generating about 0.04 per unit of risk. If you would invest  511.00  in Putnam High Income on September 19, 2024 and sell it today you would earn a total of  138.00  from holding Putnam High Income or generate 27.01% return on investment over 90 days.

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

Putnam High Income  vs.  North Star Dividend

Putnam High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam High Income has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Putnam High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

North Star Dividend

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North Star Dividend are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, North Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnam High and North Star

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

The idea behind Putnam High Income and North Star Dividend 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.