Correlation Between IShares Financials and Putnam ETF

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

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

Diversification Opportunities for IShares Financials and Putnam ETF

0.89

Correlation Coefficient

IShares Financials  Putnam ETF

Very poor diversification

The 3 months correlation between IShares and Putnam is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financials ETF and Putnam ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam ETF Trust and IShares Financials 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 Financials ETF are associated (or correlated) with Putnam ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam ETF Trust has no effect on the direction of IShares Financials i.e., IShares Financials and Putnam ETF go up and down completely randomly.

Pair Corralation between IShares Financials and Putnam ETF

Considering the 90-day investment horizon iShares Financials ETF is expected to generate 1.27 times more return on investment than Putnam ETF. However, IShares Financials is 1.27 times more volatile than Putnam ETF Trust. It trades about 0.02 of its potential returns per unit of risk. Putnam ETF Trust is currently generating about 0.02 per unit of risk. If you would invest  11,020  in iShares Financials ETF on December 28, 2024 and sell it today you would earn a total of  149.00  from holding iShares Financials ETF or generate 1.35% return on investment over 90 days.

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

iShares Financials ETF  vs.  Putnam ETF Trust

iShares Financials ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Financials ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Financials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Putnam ETF Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam ETF Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Putnam ETF is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Financials and Putnam ETF

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

The idea behind iShares Financials ETF and Putnam ETF Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.