Correlation Between Putnam Ultra and Emerald Insights

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

By analyzing existing cross correlation between Putnam Ultra Short and Emerald Insights Fund, you can compare the effects of market volatilities on Putnam Ultra and Emerald Insights 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 Ultra with a short position of Emerald Insights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Ultra and Emerald Insights.

Diversification Opportunities for Putnam Ultra and Emerald Insights

0.67

Correlation Coefficient

Putnam Ultra  Emerald Insights

Poor diversification

The 3 months correlation between Putnam and Emerald is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Ultra Short and Emerald Insights Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Insights and Putnam Ultra 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 Ultra Short are associated (or correlated) with Emerald Insights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Insights has no effect on the direction of Putnam Ultra i.e., Putnam Ultra and Emerald Insights go up and down completely randomly.

Pair Corralation between Putnam Ultra and Emerald Insights

Assuming the 90 days horizon Putnam Ultra is expected to generate 16.23 times less return on investment than Emerald Insights. But when comparing it to its historical volatility, Putnam Ultra Short is 14.02 times less risky than Emerald Insights. It trades about 0.1 of its potential returns per unit of risk. Emerald Insights Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,011  in Emerald Insights Fund on September 27, 2024 and sell it today you would earn a total of  160.00  from holding Emerald Insights Fund or generate 7.96% return on investment over 90 days.

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

Putnam Ultra Short  vs.  Emerald Insights Fund

Putnam Ultra Short

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Ultra Short are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerald Insights

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Insights Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Insights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Ultra and Emerald Insights

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

The idea behind Putnam Ultra Short and Emerald Insights Fund 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.