Correlation Between Putnman Retirement and Ariel Fund

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

By analyzing existing cross correlation between Putnman Retirement Ready and Ariel Fund Institutional, you can compare the effects of market volatilities on Putnman Retirement and Ariel Fund 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 Putnman Retirement with a short position of Ariel Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnman Retirement and Ariel Fund.

Diversification Opportunities for Putnman Retirement and Ariel Fund

0.23

Correlation Coefficient

Putnman Retirement  Ariel Fund

Modest diversification

The 3 months correlation between Putnman and Ariel is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Putnman Retirement Ready and Ariel Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Fund Institutional and Putnman Retirement 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 Putnman Retirement Ready are associated (or correlated) with Ariel Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Fund Institutional has no effect on the direction of Putnman Retirement i.e., Putnman Retirement and Ariel Fund go up and down completely randomly.

Pair Corralation between Putnman Retirement and Ariel Fund

Assuming the 90 days horizon Putnman Retirement is expected to generate 8.16 times less return on investment than Ariel Fund. But when comparing it to its historical volatility, Putnman Retirement Ready is 2.99 times less risky than Ariel Fund. It trades about 0.05 of its potential returns per unit of risk. Ariel Fund Institutional is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,421  in Ariel Fund Institutional on September 13, 2024 and sell it today you would earn a total of  678.00  from holding Ariel Fund Institutional or generate 9.14% return on investment over 90 days.

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

Putnman Retirement Ready  vs.  Ariel Fund Institutional

Putnman Retirement Ready

Risk-Adjusted Performance

4 of 100

Modest

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

Ariel Fund Institutional

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Fund Institutional are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ariel Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnman Retirement and Ariel Fund

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

The idea behind Putnman Retirement Ready and Ariel Fund Institutional 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.