Correlation Between Putnam Global and The Arbitrage

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

By analyzing existing cross correlation between Putnam Global Technology and The Arbitrage Credit, you can compare the effects of market volatilities on Putnam Global and The Arbitrage 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 The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and The Arbitrage.

Diversification Opportunities for Putnam Global and The Arbitrage

0.74

Correlation Coefficient

Putnam Global  The Arbitrage

Poor diversification

The 3 months correlation between Putnam and The is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Technology and The Arbitrage Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Credit 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 Technology are associated (or correlated) with The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Credit has no effect on the direction of Putnam Global i.e., Putnam Global and The Arbitrage go up and down completely randomly.

Pair Corralation between Putnam Global and The Arbitrage

Assuming the 90 days horizon Putnam Global Technology is expected to generate 12.14 times more return on investment than The Arbitrage. However, Putnam Global is 12.14 times more volatile than The Arbitrage Credit. It trades about 0.1 of its potential returns per unit of risk. The Arbitrage Credit is currently generating about 0.2 per unit of risk. If you would invest  5,665  in Putnam Global Technology on September 4, 2024 and sell it today you would earn a total of  1,983  from holding Putnam Global Technology or generate 35.0% return on investment over 90 days.

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

Putnam Global Technology  vs.  The Arbitrage Credit

Putnam Global Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Technology are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arbitrage Credit

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Credit are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, The Arbitrage 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 Global and The Arbitrage

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

The idea behind Putnam Global Technology and The Arbitrage Credit 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.