Correlation Between Icon Natural and Putnam Growth

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

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

Diversification Opportunities for Icon Natural and Putnam Growth

0.29

Correlation Coefficient

Icon Natural  Putnam Growth

Modest diversification

The 3 months correlation between Icon and Putnam is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Icon Natural Resources and Putnam Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Growth Opport and Icon Natural 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 Icon Natural Resources are associated (or correlated) with Putnam Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Growth Opport has no effect on the direction of Icon Natural i.e., Icon Natural and Putnam Growth go up and down completely randomly.

Pair Corralation between Icon Natural and Putnam Growth

Assuming the 90 days horizon Icon Natural Resources is expected to under-perform the Putnam Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Icon Natural Resources is 1.43 times less risky than Putnam Growth. The mutual fund trades about -0.26 of its potential returns per unit of risk. The Putnam Growth Opportunities is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,686  in Putnam Growth Opportunities on October 10, 2024 and sell it today you would lose (78.00) from holding Putnam Growth Opportunities or give up 1.01% of portfolio value over 90 days.

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

Icon Natural Resources  vs.  Putnam Growth Opportunities

Icon Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Putnam Growth Opport

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Growth Opportunities are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Putnam Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Icon Natural and Putnam Growth

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

The idea behind Icon Natural Resources and Putnam Growth 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.