Correlation Between Putnam Growth and Icon Natural

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

By analyzing existing cross correlation between Putnam Growth Opportunities and Icon Natural Resources, you can compare the effects of market volatilities on Putnam Growth and Icon Natural 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 Growth with a short position of Icon Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Growth and Icon Natural.

Diversification Opportunities for Putnam Growth and Icon Natural

0.67

Correlation Coefficient

Putnam Growth  Icon Natural

Poor diversification

The 3 months correlation between Putnam and Icon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Growth Opportunities and Icon Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Natural Resources and Putnam Growth 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 Growth Opportunities are associated (or correlated) with Icon Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Natural Resources has no effect on the direction of Putnam Growth i.e., Putnam Growth and Icon Natural go up and down completely randomly.

Pair Corralation between Putnam Growth and Icon Natural

Assuming the 90 days horizon Putnam Growth Opportunities is expected to generate 0.94 times more return on investment than Icon Natural. However, Putnam Growth Opportunities is 1.07 times less risky than Icon Natural. It trades about 0.13 of its potential returns per unit of risk. Icon Natural Resources is currently generating about 0.0 per unit of risk. If you would invest  7,053  in Putnam Growth Opportunities on September 23, 2024 and sell it today you would earn a total of  617.00  from holding Putnam Growth Opportunities or generate 8.75% return on investment over 90 days.

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

Putnam Growth Opportunities  vs.  Icon Natural Resources

Putnam Growth Opport

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Growth Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Putnam Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Icon Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Icon Natural 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 Growth and Icon Natural

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

The idea behind Putnam Growth Opportunities and Icon Natural Resources 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.