Correlation Between Eaton Vance and Putnam Municipal

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

By analyzing existing cross correlation between Eaton Vance Tax and Putnam Municipal Opportunities, you can compare the effects of market volatilities on Eaton Vance and Putnam Municipal 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 Eaton Vance with a short position of Putnam Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Putnam Municipal.

Diversification Opportunities for Eaton Vance and Putnam Municipal

0.54

Correlation Coefficient

Eaton Vance  Putnam Municipal

Very weak diversification

The 3 months correlation between Eaton and Putnam is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Tax and Putnam Municipal Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Municipal Opp and Eaton Vance 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 Eaton Vance Tax are associated (or correlated) with Putnam Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Municipal Opp has no effect on the direction of Eaton Vance i.e., Eaton Vance and Putnam Municipal go up and down completely randomly.

Pair Corralation between Eaton Vance and Putnam Municipal

Considering the 90-day investment horizon Eaton Vance is expected to generate 3.88 times less return on investment than Putnam Municipal. In addition to that, Eaton Vance is 1.07 times more volatile than Putnam Municipal Opportunities. It trades about 0.01 of its total potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.05 per unit of volatility. If you would invest  994.00  in Putnam Municipal Opportunities on December 27, 2024 and sell it today you would earn a total of  21.00  from holding Putnam Municipal Opportunities or generate 2.11% return on investment over 90 days.

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

Eaton Vance Tax  vs.  Putnam Municipal Opportunities

Eaton Vance Tax

Risk-Adjusted Performance

Weak

Over the last 90 days Eaton Vance Tax has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Eaton Vance is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Putnam Municipal Opp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Municipal Opportunities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Putnam Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and Putnam Municipal

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

The idea behind Eaton Vance Tax and Putnam Municipal Opportunities 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.