Correlation Between Putnam Sustainable and IShares Factors

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

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

Diversification Opportunities for Putnam Sustainable and IShares Factors

0.81

Correlation Coefficient

Putnam Sustainable  IShares Factors

Very poor diversification

The 3 months correlation between Putnam and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Sustainable Leaders and iShares Factors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Factors Growth and Putnam Sustainable 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 Sustainable Leaders are associated (or correlated) with IShares Factors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Factors Growth has no effect on the direction of Putnam Sustainable i.e., Putnam Sustainable and IShares Factors go up and down completely randomly.

Pair Corralation between Putnam Sustainable and IShares Factors

Given the investment horizon of 90 days Putnam Sustainable is expected to generate 2.02 times less return on investment than IShares Factors. But when comparing it to its historical volatility, Putnam Sustainable Leaders is 1.46 times less risky than IShares Factors. It trades about 0.13 of its potential returns per unit of risk. iShares Factors Growth is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,154  in iShares Factors Growth on September 12, 2024 and sell it today you would earn a total of  580.00  from holding iShares Factors Growth or generate 11.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

Putnam Sustainable Leaders  vs.  iShares Factors Growth

Putnam Sustainable

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Sustainable Leaders are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Putnam Sustainable is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares Factors Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Factors Growth are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Sustainable and IShares Factors

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

The idea behind Putnam Sustainable Leaders and iShares Factors Growth 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.