Correlation Between Main International and Putnam Focused

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

By analyzing existing cross correlation between Main International ETF and Putnam Focused Large, you can compare the effects of market volatilities on Main International and Putnam Focused 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 Main International with a short position of Putnam Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main International and Putnam Focused.

Diversification Opportunities for Main International and Putnam Focused

-0.45

Correlation Coefficient

Main International  Putnam Focused

Very good diversification

The 3 months correlation between Main and Putnam is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Main International ETF and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large and Main International 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 Main International ETF are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of Main International i.e., Main International and Putnam Focused go up and down completely randomly.

Pair Corralation between Main International and Putnam Focused

Given the investment horizon of 90 days Main International is expected to generate 5.18 times less return on investment than Putnam Focused. But when comparing it to its historical volatility, Main International ETF is 1.24 times less risky than Putnam Focused. It trades about 0.03 of its potential returns per unit of risk. Putnam Focused Large is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,079  in Putnam Focused Large on October 4, 2024 and sell it today you would earn a total of  1,800  from holding Putnam Focused Large or generate 86.57% return on investment over 90 days.

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

Main International ETF  vs.  Putnam Focused Large

Main International ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Main International ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Main International is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Putnam Focused Large

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Putnam Focused may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Main International and Putnam Focused

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

The idea behind Main International ETF and Putnam Focused Large 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.