Correlation Between Putnam Floating and Longleaf Partners

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

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

Diversification Opportunities for Putnam Floating and Longleaf Partners

0.76

Correlation Coefficient

Putnam Floating  Longleaf Partners

Poor diversification

The 3 months correlation between Putnam and Longleaf is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Floating Rate and Longleaf Partners Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners Small and Putnam Floating 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 Floating Rate are associated (or correlated) with Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners Small has no effect on the direction of Putnam Floating i.e., Putnam Floating and Longleaf Partners go up and down completely randomly.

Pair Corralation between Putnam Floating and Longleaf Partners

Assuming the 90 days horizon Putnam Floating is expected to generate 3.42 times less return on investment than Longleaf Partners. But when comparing it to its historical volatility, Putnam Floating Rate is 7.9 times less risky than Longleaf Partners. It trades about 0.26 of its potential returns per unit of risk. Longleaf Partners Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,731  in Longleaf Partners Small Cap on September 14, 2024 and sell it today you would earn a total of  152.00  from holding Longleaf Partners Small Cap or generate 5.57% return on investment over 90 days.

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

Putnam Floating Rate  vs.  Longleaf Partners Small Cap

Putnam Floating Rate

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Floating Rate are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Putnam Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Longleaf Partners Small

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Longleaf Partners 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 Floating and Longleaf Partners

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

The idea behind Putnam Floating Rate and Longleaf Partners Small Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..