Correlation Between Franklin Federal and Putnam Global

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

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

Diversification Opportunities for Franklin Federal and Putnam Global

0.18

Correlation Coefficient

Franklin Federal  Putnam Global

Average diversification

The 3 months correlation between Franklin and Putnam is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Putnam Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Health and Franklin Federal 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 Franklin Federal Limited Term 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 Health has no effect on the direction of Franklin Federal i.e., Franklin Federal and Putnam Global go up and down completely randomly.

Pair Corralation between Franklin Federal and Putnam Global

Assuming the 90 days horizon Franklin Federal is expected to generate 1.31 times less return on investment than Putnam Global. But when comparing it to its historical volatility, Franklin Federal Limited Term is 6.52 times less risky than Putnam Global. It trades about 0.11 of its potential returns per unit of risk. Putnam Global Health is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,884  in Putnam Global Health on October 6, 2024 and sell it today you would earn a total of  415.00  from holding Putnam Global Health or generate 7.05% return on investment over 90 days.

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

Franklin Federal Limited Term  vs.  Putnam Global Health

Franklin Federal Lim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Federal Limited Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Franklin Federal and Putnam Global

The main advantage of trading using opposite Franklin Federal and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal 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 Franklin Federal Limited Term and Putnam Global Health 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.