Correlation Between Morningstar Global and Putnam International

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

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

Diversification Opportunities for Morningstar Global and Putnam International

0.67

Correlation Coefficient

Morningstar Global  Putnam International

Poor diversification

The 3 months correlation between Morningstar and Putnam is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Global Income and Putnam International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam International and Morningstar Global 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 Morningstar Global Income are associated (or correlated) with Putnam International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam International has no effect on the direction of Morningstar Global i.e., Morningstar Global and Putnam International go up and down completely randomly.

Pair Corralation between Morningstar Global and Putnam International

Assuming the 90 days horizon Morningstar Global Income is expected to generate 0.45 times more return on investment than Putnam International. However, Morningstar Global Income is 2.21 times less risky than Putnam International. It trades about 0.05 of its potential returns per unit of risk. Putnam International Capital is currently generating about 0.01 per unit of risk. If you would invest  880.00  in Morningstar Global Income on October 7, 2024 and sell it today you would earn a total of  42.00  from holding Morningstar Global Income or generate 4.77% return on investment over 90 days.

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

Morningstar Global Income  vs.  Putnam International Capital

Morningstar Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Global Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Morningstar Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam International Capital 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.

Pair Trading with Morningstar Global and Putnam International

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

The idea behind Morningstar Global Income and Putnam International Capital 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.