Correlation Between California Bond and Putnam Equity

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both California Bond and Putnam Equity 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 California Bond and Putnam Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Putnam Equity Income, you can compare the effects of market volatilities on California Bond and Putnam Equity 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 California Bond with a short position of Putnam Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Putnam Equity.

Diversification Opportunities for California Bond and Putnam Equity

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between California and Putnam is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Putnam Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Equity Income and California Bond 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 California Bond Fund are associated (or correlated) with Putnam Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Equity Income has no effect on the direction of California Bond i.e., California Bond and Putnam Equity go up and down completely randomly.

Pair Corralation between California Bond and Putnam Equity

Assuming the 90 days horizon California Bond is expected to generate 4.66 times less return on investment than Putnam Equity. But when comparing it to its historical volatility, California Bond Fund is 2.74 times less risky than Putnam Equity. It trades about 0.07 of its potential returns per unit of risk. Putnam Equity Income is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,637  in Putnam Equity Income on September 5, 2024 and sell it today you would earn a total of  1,226  from holding Putnam Equity Income or generate 46.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

California Bond Fund  vs.  Putnam Equity Income

 Performance 
       Timeline  
California Bond 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in California Bond Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, California Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Putnam Equity Income 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Equity Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

California Bond and Putnam Equity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with California Bond and Putnam Equity

The main advantage of trading using opposite California Bond and Putnam Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Putnam Equity 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 Equity will offset losses from the drop in Putnam Equity's long position.
The idea behind California Bond Fund and Putnam Equity Income 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.
Check out your portfolio center.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

Other Complementary Tools

Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Commodity Directory
Find actively traded commodities issued by global exchanges