Correlation Between Putnam Convertible and Columbia Convertible

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

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

Diversification Opportunities for Putnam Convertible and Columbia Convertible

0.91

Correlation Coefficient

Putnam Convertible  Columbia Convertible

Almost no diversification

The 3 months correlation between Putnam and Columbia is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Vertible Securities and Columbia Convertible Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible and Putnam Convertible 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 Vertible Securities are associated (or correlated) with Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Columbia Convertible go up and down completely randomly.

Pair Corralation between Putnam Convertible and Columbia Convertible

Assuming the 90 days horizon Putnam Vertible Securities is expected to under-perform the Columbia Convertible. In addition to that, Putnam Convertible is 1.1 times more volatile than Columbia Convertible Securities. It trades about -0.07 of its total potential returns per unit of risk. Columbia Convertible Securities is currently generating about -0.03 per unit of volatility. If you would invest  2,199  in Columbia Convertible Securities on December 22, 2024 and sell it today you would lose (29.00) from holding Columbia Convertible Securities or give up 1.32% of portfolio value over 90 days.

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

Putnam Vertible Securities  vs.  Columbia Convertible Securitie

Putnam Vertible Secu

Risk-Adjusted Performance

Very Weak

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

Columbia Convertible

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Convertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Columbia Convertible 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 Convertible and Columbia Convertible

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

The idea behind Putnam Vertible Securities and Columbia Convertible Securities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.