Correlation Between Short Duration and Putnam Global

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

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

Diversification Opportunities for Short Duration and Putnam Global

0.29

Correlation Coefficient

Short Duration  Putnam Global

Modest diversification

The 3 months correlation between Short and Putnam is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Putnam Global Incm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Incm and Short Duration 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 Short Duration Inflation 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 Incm has no effect on the direction of Short Duration i.e., Short Duration and Putnam Global go up and down completely randomly.

Pair Corralation between Short Duration and Putnam Global

Assuming the 90 days horizon Short Duration Inflation is expected to generate 0.51 times more return on investment than Putnam Global. However, Short Duration Inflation is 1.95 times less risky than Putnam Global. It trades about 0.28 of its potential returns per unit of risk. Putnam Global Incm is currently generating about -0.01 per unit of risk. If you would invest  1,030  in Short Duration Inflation on December 2, 2024 and sell it today you would earn a total of  22.00  from holding Short Duration Inflation or generate 2.14% return on investment over 90 days.

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

Short Duration Inflation  vs.  Putnam Global Incm

Short Duration Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Inflation are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Global Incm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Putnam Global Incm has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 Short Duration and Putnam Global

The main advantage of trading using opposite Short Duration and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration 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 Short Duration Inflation and Putnam Global Incm 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.