Correlation Between Applied Finance and Putnam Global

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

By analyzing existing cross correlation between Applied Finance Explorer and Putnam Global Equity, you can compare the effects of market volatilities on Applied Finance and Putnam Global 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 Applied Finance with a short position of Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Putnam Global.

Diversification Opportunities for Applied Finance and Putnam Global

-0.07

Correlation Coefficient

Applied Finance  Putnam Global

Good diversification

The 3 months correlation between Applied and Putnam is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Putnam Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Equity and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Equity has no effect on the direction of Applied Finance i.e., Applied Finance and Putnam Global go up and down completely randomly.

Pair Corralation between Applied Finance and Putnam Global

Assuming the 90 days horizon Applied Finance Explorer is expected to generate 2.36 times more return on investment than Putnam Global. However, Applied Finance is 2.36 times more volatile than Putnam Global Equity. It trades about 0.03 of its potential returns per unit of risk. Putnam Global Equity is currently generating about 0.03 per unit of risk. If you would invest  1,954  in Applied Finance Explorer on October 9, 2024 and sell it today you would earn a total of  214.00  from holding Applied Finance Explorer or generate 10.95% return on investment over 90 days.

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

Applied Finance Explorer  vs.  Putnam Global Equity

Applied Finance Explorer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Applied Finance and Putnam Global

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

The idea behind Applied Finance Explorer and Putnam Global Equity 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 Transaction History module to view history of all your transactions and understand their impact on performance.