Correlation Between IShares SP and Putnam Sustainable

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

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

Diversification Opportunities for IShares SP and Putnam Sustainable

0.92

Correlation Coefficient

IShares SP  Putnam Sustainable

Almost no diversification

The 3 months correlation between IShares and Putnam is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and Putnam Sustainable Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable Future and IShares SP 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 SP Mid Cap are associated (or correlated) with Putnam Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable Future has no effect on the direction of IShares SP i.e., IShares SP and Putnam Sustainable go up and down completely randomly.

Pair Corralation between IShares SP and Putnam Sustainable

Considering the 90-day investment horizon IShares SP is expected to generate 1.26 times less return on investment than Putnam Sustainable. In addition to that, IShares SP is 1.01 times more volatile than Putnam Sustainable Future. It trades about 0.06 of its total potential returns per unit of risk. Putnam Sustainable Future is currently generating about 0.08 per unit of volatility. If you would invest  1,773  in Putnam Sustainable Future on October 7, 2024 and sell it today you would earn a total of  755.00  from holding Putnam Sustainable Future or generate 42.58% return on investment over 90 days.

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

iShares SP Mid Cap  vs.  Putnam Sustainable Future

iShares SP Mid

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Putnam Sustainable Future

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Sustainable Future are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Putnam Sustainable is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and Putnam Sustainable

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

The idea behind iShares SP Mid Cap and Putnam Sustainable Future 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.