Correlation Between George Putnam and Putnam Equity

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

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

Diversification Opportunities for George Putnam and Putnam Equity

0.73

Correlation Coefficient

George Putnam  Putnam Equity

Poor diversification

The 3 months correlation between George and Putnam is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding George Putnam Fund 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 George Putnam 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 George Putnam Fund 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 George Putnam i.e., George Putnam and Putnam Equity go up and down completely randomly.

Pair Corralation between George Putnam and Putnam Equity

Assuming the 90 days horizon George Putnam is expected to generate 2.56 times less return on investment than Putnam Equity. But when comparing it to its historical volatility, George Putnam Fund is 1.01 times less risky than Putnam Equity. It trades about 0.06 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,650  in Putnam Equity Income on September 4, 2024 and sell it today you would earn a total of  225.00  from holding Putnam Equity Income or generate 6.16% return on investment over 90 days.

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

George Putnam Fund  vs.  Putnam Equity Income

George Putnam

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in George Putnam Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, George Putnam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Equity Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Equity Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with George Putnam and Putnam Equity

The main advantage of trading using opposite George Putnam and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if George Putnam 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 George Putnam Fund 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.