Correlation Between Huber Capital and Putnam Tax

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

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

Diversification Opportunities for Huber Capital and Putnam Tax

0.28

Correlation Coefficient

Huber Capital  Putnam Tax

Modest diversification

The 3 months correlation between Huber and Putnam is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Huber Capital Equity and Putnam Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Tax Exempt and Huber Capital 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 Huber Capital Equity are associated (or correlated) with Putnam Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Tax Exempt has no effect on the direction of Huber Capital i.e., Huber Capital and Putnam Tax go up and down completely randomly.

Pair Corralation between Huber Capital and Putnam Tax

Assuming the 90 days horizon Huber Capital Equity is expected to under-perform the Putnam Tax. In addition to that, Huber Capital is 2.85 times more volatile than Putnam Tax Exempt. It trades about -0.28 of its total potential returns per unit of risk. Putnam Tax Exempt is currently generating about -0.35 per unit of volatility. If you would invest  799.00  in Putnam Tax Exempt on October 4, 2024 and sell it today you would lose (17.00) from holding Putnam Tax Exempt or give up 2.13% of portfolio value over 90 days.

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

Huber Capital Equity  vs.  Putnam Tax Exempt

Huber Capital Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huber Capital Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Huber Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Huber Capital and Putnam Tax

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

The idea behind Huber Capital Equity and Putnam Tax Exempt 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.