Correlation Between Putnam International and Tekla Healthcare

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

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

Diversification Opportunities for Putnam International and Tekla Healthcare

0.83

Correlation Coefficient

Putnam International  Tekla Healthcare

Very poor diversification

The 3 months correlation between Putnam and Tekla is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Equity and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Putnam International 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 International Equity are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Putnam International i.e., Putnam International and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Putnam International and Tekla Healthcare

Assuming the 90 days horizon Putnam International is expected to generate 1.87 times less return on investment than Tekla Healthcare. But when comparing it to its historical volatility, Putnam International Equity is 1.2 times less risky than Tekla Healthcare. It trades about 0.07 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Tekla Healthcare Opportunities on September 8, 2024 and sell it today you would earn a total of  553.00  from holding Tekla Healthcare Opportunities or generate 36.74% return on investment over 90 days.

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

Putnam International Equity  vs.  Tekla Healthcare Opportunities

Putnam International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putnam International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Putnam International and Tekla Healthcare

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

The idea behind Putnam International Equity and Tekla Healthcare Opportunities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.