Correlation Between Putnam Asia and Princeton Premium

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

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

Diversification Opportunities for Putnam Asia and Princeton Premium

0.78

Correlation Coefficient

Putnam Asia  Princeton Premium

Poor diversification

The 3 months correlation between Putnam and Princeton is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Asia Pacific and Princeton Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Premium and Putnam Asia 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 Putnam Asia Pacific are associated (or correlated) with Princeton Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Premium has no effect on the direction of Putnam Asia i.e., Putnam Asia and Princeton Premium go up and down completely randomly.

Pair Corralation between Putnam Asia and Princeton Premium

Assuming the 90 days horizon Putnam Asia Pacific is expected to under-perform the Princeton Premium. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Asia Pacific is 1.22 times less risky than Princeton Premium. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Princeton Premium is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,185  in Princeton Premium on September 29, 2024 and sell it today you would lose (23.00) from holding Princeton Premium or give up 1.94% of portfolio value over 90 days.

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

Putnam Asia Pacific  vs.  Princeton Premium

Putnam Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

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

Princeton Premium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Putnam Asia and Princeton Premium

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

The idea behind Putnam Asia Pacific and Princeton Premium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.