Correlation Between Putnam Global and Vanguard Health

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

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

Diversification Opportunities for Putnam Global and Vanguard Health

0.99

Correlation Coefficient

Putnam Global  Vanguard Health

No risk reduction

The 3 months correlation between Putnam and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Health and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care 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 Health are associated (or correlated) with Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Putnam Global i.e., Putnam Global and Vanguard Health go up and down completely randomly.

Pair Corralation between Putnam Global and Vanguard Health

Assuming the 90 days horizon Putnam Global Health is expected to generate 0.87 times more return on investment than Vanguard Health. However, Putnam Global Health is 1.15 times less risky than Vanguard Health. It trades about -0.24 of its potential returns per unit of risk. Vanguard Health Care is currently generating about -0.22 per unit of risk. If you would invest  6,755  in Putnam Global Health on September 13, 2024 and sell it today you would lose (638.00) from holding Putnam Global Health or give up 9.44% of portfolio value over 90 days.

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

Putnam Global Health  vs.  Vanguard Health Care

Putnam Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Putnam Global and Vanguard Health

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

The idea behind Putnam Global Health and Vanguard Health Care 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.