Correlation Between Alger Midcap and Putnam Ultra

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

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

Diversification Opportunities for Alger Midcap and Putnam Ultra

0.48

Correlation Coefficient

Alger Midcap  Putnam Ultra

Very weak diversification

The 3 months correlation between Alger and Putnam is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alger Midcap Growth and Putnam Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Ultra Short and Alger Midcap 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 Alger Midcap Growth are associated (or correlated) with Putnam Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Ultra Short has no effect on the direction of Alger Midcap i.e., Alger Midcap and Putnam Ultra go up and down completely randomly.

Pair Corralation between Alger Midcap and Putnam Ultra

Assuming the 90 days horizon Alger Midcap Growth is expected to under-perform the Putnam Ultra. In addition to that, Alger Midcap is 35.92 times more volatile than Putnam Ultra Short. It trades about -0.25 of its total potential returns per unit of risk. Putnam Ultra Short is currently generating about -0.13 per unit of volatility. If you would invest  1,011  in Putnam Ultra Short on October 15, 2024 and sell it today you would lose (1.00) from holding Putnam Ultra Short or give up 0.1% of portfolio value over 90 days.

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

Alger Midcap Growth  vs.  Putnam Ultra Short

Alger Midcap Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alger Midcap Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Ultra Short

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Ultra Short are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alger Midcap and Putnam Ultra

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

The idea behind Alger Midcap Growth and Putnam Ultra Short 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.