Correlation Between ProShares Big and Putnam Focused

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

By analyzing existing cross correlation between ProShares Big Data and Putnam Focused Large, you can compare the effects of market volatilities on ProShares Big and Putnam Focused 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 ProShares Big with a short position of Putnam Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Big and Putnam Focused.

Diversification Opportunities for ProShares Big and Putnam Focused

0.63

Correlation Coefficient

ProShares Big  Putnam Focused

Poor diversification

The 3 months correlation between ProShares and Putnam is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Big Data and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large and ProShares Big 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 ProShares Big Data are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of ProShares Big i.e., ProShares Big and Putnam Focused go up and down completely randomly.

Pair Corralation between ProShares Big and Putnam Focused

Considering the 90-day investment horizon ProShares Big Data is expected to generate 2.22 times more return on investment than Putnam Focused. However, ProShares Big is 2.22 times more volatile than Putnam Focused Large. It trades about 0.1 of its potential returns per unit of risk. Putnam Focused Large is currently generating about 0.13 per unit of risk. If you would invest  3,023  in ProShares Big Data on September 23, 2024 and sell it today you would earn a total of  1,536  from holding ProShares Big Data or generate 50.81% return on investment over 90 days.

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

ProShares Big Data  vs.  Putnam Focused Large

ProShares Big Data

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Big Data are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Big unveiled solid returns over the last few months and may actually be approaching a breakup point.

Putnam Focused Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Focused Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Putnam Focused is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares Big and Putnam Focused

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

The idea behind ProShares Big Data and Putnam Focused Large 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.