Correlation Between IShares Factors and Putnam Sustainable

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

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

Diversification Opportunities for IShares Factors and Putnam Sustainable

0.81

Correlation Coefficient

IShares Factors  Putnam Sustainable

Very poor diversification

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

Pair Corralation between IShares Factors and Putnam Sustainable

Given the investment horizon of 90 days iShares Factors Growth is expected to generate 1.49 times more return on investment than Putnam Sustainable. However, IShares Factors is 1.49 times more volatile than Putnam Sustainable Leaders. It trades about 0.11 of its potential returns per unit of risk. Putnam Sustainable Leaders is currently generating about 0.13 per unit of risk. If you would invest  5,641  in iShares Factors Growth on September 12, 2024 and sell it today you would earn a total of  93.00  from holding iShares Factors Growth or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

iShares Factors Growth  vs.  Putnam Sustainable Leaders

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.

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.

Pair Trading with IShares Factors and Putnam Sustainable

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

The idea behind iShares Factors Growth and Putnam Sustainable Leaders 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.