Correlation Between Putnam Focused and First Trust

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

By analyzing existing cross correlation between Putnam Focused Large and First Trust RiverFront, you can compare the effects of market volatilities on Putnam Focused and First Trust 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 Focused with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Focused and First Trust.

Diversification Opportunities for Putnam Focused and First Trust

-0.39

Correlation Coefficient

Putnam Focused  First Trust

Very good diversification

The 3 months correlation between Putnam and First is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront and Putnam Focused 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 Focused Large are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust RiverFront has no effect on the direction of Putnam Focused i.e., Putnam Focused and First Trust go up and down completely randomly.

Pair Corralation between Putnam Focused and First Trust

Given the investment horizon of 90 days Putnam Focused Large is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Putnam Focused Large is 1.18 times less risky than First Trust. The etf trades about -0.4 of its potential returns per unit of risk. The First Trust RiverFront is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  6,200  in First Trust RiverFront on September 23, 2024 and sell it today you would lose (140.00) from holding First Trust RiverFront or give up 2.26% of portfolio value over 90 days.

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

Putnam Focused Large  vs.  First Trust RiverFront

Putnam Focused Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Focused Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Putnam Focused is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

First Trust RiverFront

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust RiverFront has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Putnam Focused and First Trust

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

The idea behind Putnam Focused Large and First Trust RiverFront 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..