Correlation Between T Rowe and Putnam U

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

By analyzing existing cross correlation between T Rowe Price and Putnam U S, you can compare the effects of market volatilities on T Rowe and Putnam U 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 T Rowe with a short position of Putnam U. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Putnam U.

Diversification Opportunities for T Rowe and Putnam U

-0.34

Correlation Coefficient

T Rowe  Putnam U

Very good diversification

The 3 months correlation between TQAAX and Putnam is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Putnam U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam U S and T Rowe 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 T Rowe Price are associated (or correlated) with Putnam U. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam U S has no effect on the direction of T Rowe i.e., T Rowe and Putnam U go up and down completely randomly.

Pair Corralation between T Rowe and Putnam U

Assuming the 90 days horizon T Rowe Price is expected to generate 2.55 times more return on investment than Putnam U. However, T Rowe is 2.55 times more volatile than Putnam U S. It trades about 0.07 of its potential returns per unit of risk. Putnam U S is currently generating about 0.08 per unit of risk. If you would invest  3,764  in T Rowe Price on September 12, 2024 and sell it today you would earn a total of  1,090  from holding T Rowe Price or generate 28.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

T Rowe Price  vs.  Putnam U S

T Rowe Price

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putnam U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Putnam U is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Putnam U

The main advantage of trading using opposite T Rowe and Putnam U positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Putnam U 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 U will offset losses from the drop in Putnam U's long position.

The idea behind T Rowe Price and Putnam U S 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.