Correlation Between IShares Core and Putnam Focused

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

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

Diversification Opportunities for IShares Core and Putnam Focused

0.95

Correlation Coefficient

IShares Core  Putnam Focused

Almost no diversification

The 3 months correlation between IShares and Putnam is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend 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 IShares Core 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 iShares Core Dividend 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 IShares Core i.e., IShares Core and Putnam Focused go up and down completely randomly.

Pair Corralation between IShares Core and Putnam Focused

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 0.98 times more return on investment than Putnam Focused. However, iShares Core Dividend is 1.02 times less risky than Putnam Focused. It trades about -0.28 of its potential returns per unit of risk. Putnam Focused Large is currently generating about -0.4 per unit of risk. If you would invest  6,388  in iShares Core Dividend on September 23, 2024 and sell it today you would lose (250.00) from holding iShares Core Dividend or give up 3.91% of portfolio value over 90 days.

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

iShares Core Dividend  vs.  Putnam Focused Large

iShares Core Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 IShares Core and Putnam Focused

The main advantage of trading using opposite IShares Core and Putnam Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core Dividend 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.