Correlation Between Putnam High and Rivernorth Opportunities

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

Diversification Opportunities for Putnam High and Rivernorth Opportunities

0.84

Correlation Coefficient

Putnam High  Rivernorth Opportunities

Very poor diversification

The 3 months correlation between Putnam and Rivernorth is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Putnam High Income and Rivernorth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivernorth Opportunities 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 Rivernorth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivernorth Opportunities has no effect on the direction of Putnam High i.e., Putnam High and Rivernorth Opportunities go up and down completely randomly.

Pair Corralation between Putnam High and Rivernorth Opportunities

Considering the 90-day investment horizon Putnam High is expected to generate 1.46 times less return on investment than Rivernorth Opportunities. But when comparing it to its historical volatility, Putnam High Income is 1.32 times less risky than Rivernorth Opportunities. It trades about 0.13 of its potential returns per unit of risk. Rivernorth Opportunities is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,112  in Rivernorth Opportunities on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Rivernorth Opportunities or generate 6.74% return on investment over 90 days.

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

Putnam High Income  vs.  Rivernorth Opportunities

Putnam High Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam High Income are ranked lower than 10 (%) 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.

Rivernorth Opportunities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rivernorth Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Rivernorth Opportunities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Putnam High and Rivernorth Opportunities

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

The idea behind Putnam High Income and Rivernorth 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.