Correlation Between Putnam Global and Putnam Equity

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

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

Diversification Opportunities for Putnam Global and Putnam Equity

0.92

Correlation Coefficient

Putnam Global  Putnam Equity

Almost no diversification

The 3 months correlation between Putnam and Putnam is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Industrials and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income and Putnam Global 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 Global Industrials are associated (or correlated) with Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of Putnam Global i.e., Putnam Global and Putnam Equity go up and down completely randomly.

Pair Corralation between Putnam Global and Putnam Equity

Assuming the 90 days horizon Putnam Global Industrials is expected to generate 1.04 times more return on investment than Putnam Equity. However, Putnam Global is 1.04 times more volatile than Putnam Equity Income. It trades about 0.14 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.04 per unit of risk. If you would invest  3,440  in Putnam Global Industrials on September 7, 2024 and sell it today you would earn a total of  534.00  from holding Putnam Global Industrials or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.21%
Values	Daily Returns

Putnam Global Industrials  vs.  Putnam Equity Income

Putnam Global Industrials

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Industrials are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Putnam Global showed solid returns over the last few months and may actually be approaching a breakup point.

Putnam Equity Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Equity Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Global and Putnam Equity

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

The idea behind Putnam Global Industrials and Putnam Equity Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.