Correlation Between Putnam High and Eagle Point

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

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

Diversification Opportunities for Putnam High and Eagle Point

-0.43

Correlation Coefficient

Putnam High  Eagle Point

Very good diversification

The 3 months correlation between Putnam and Eagle is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Putnam High Income and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit and Putnam High 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 High Income are associated (or correlated) with Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Credit has no effect on the direction of Putnam High i.e., Putnam High and Eagle Point go up and down completely randomly.

Pair Corralation between Putnam High and Eagle Point

Considering the 90-day investment horizon Putnam High Income is expected to generate 0.76 times more return on investment than Eagle Point. However, Putnam High Income is 1.32 times less risky than Eagle Point. It trades about 0.12 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.11 per unit of risk. If you would invest  655.00  in Putnam High Income on September 4, 2024 and sell it today you would earn a total of  25.00  from holding Putnam High Income or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Putnam High Income  vs.  Eagle Point Credit

Putnam High Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam High Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable fundamental indicators, Putnam High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eagle Point Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Point Credit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Putnam High and Eagle Point

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

The idea behind Putnam High Income and Eagle Point Credit 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.