Correlation Between Lexinfintech Holdings and Putnam Municipal

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

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

Diversification Opportunities for Lexinfintech Holdings and Putnam Municipal

0.63

Correlation Coefficient

Lexinfintech Holdings  Putnam Municipal

Poor diversification

The 3 months correlation between Lexinfintech and Putnam is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings and Putnam Municipal Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Municipal Opp and Lexinfintech Holdings 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 Lexinfintech Holdings are associated (or correlated) with Putnam Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Municipal Opp has no effect on the direction of Lexinfintech Holdings i.e., Lexinfintech Holdings and Putnam Municipal go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and Putnam Municipal

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 7.64 times more return on investment than Putnam Municipal. However, Lexinfintech Holdings is 7.64 times more volatile than Putnam Municipal Opportunities. It trades about 0.2 of its potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.04 per unit of risk. If you would invest  591.00  in Lexinfintech Holdings on December 20, 2024 and sell it today you would earn a total of  461.00  from holding Lexinfintech Holdings or generate 78.0% return on investment over 90 days.

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

Lexinfintech Holdings  vs.  Putnam Municipal Opportunities

Lexinfintech Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lexinfintech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Putnam Municipal Opp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Municipal Opportunities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Putnam Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lexinfintech Holdings and Putnam Municipal

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

The idea behind Lexinfintech Holdings and Putnam Municipal 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.