Correlation Between Putnam High and Pzena International

Can any of the company-specific risk be diversified away by investing in both Putnam High and Pzena 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 Putnam High and Pzena International 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 Pzena International Value, you can compare the effects of market volatilities on Putnam High and Pzena 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 Putnam High with a short position of Pzena International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam High and Pzena International.

Diversification Opportunities for Putnam High and Pzena International

0.76

Correlation Coefficient

Putnam High  Pzena International

Poor diversification

The 3 months correlation between Putnam and Pzena is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Putnam High Income and Pzena International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Value 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 Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Value has no effect on the direction of Putnam High i.e., Putnam High and Pzena International go up and down completely randomly.

Pair Corralation between Putnam High and Pzena International

Considering the 90-day investment horizon Putnam High is expected to generate 2.65 times less return on investment than Pzena International. But when comparing it to its historical volatility, Putnam High Income is 1.8 times less risky than Pzena International. It trades about 0.14 of its potential returns per unit of risk. Pzena International Value is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Pzena International Value on December 27, 2024 and sell it today you would earn a total of  141.00  from holding Pzena International Value or generate 13.96% return on investment over 90 days.

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

Putnam High Income  vs.  Pzena International Value

Putnam High Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam High Income are ranked lower than 11 (%) 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.

Pzena International Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena International Value are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pzena International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Putnam High and Pzena International

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

The idea behind Putnam High Income and Pzena International Value 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.