Correlation Between Putnam Convertible and Royce Dividend

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

Diversification Opportunities for Putnam Convertible and Royce Dividend

0.71

Correlation Coefficient

Putnam Convertible  Royce Dividend

Poor diversification

The 3 months correlation between PUTNAM and Royce is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Vertible Securities and Royce Dividend Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Dividend Value 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 Royce Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Dividend Value has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Royce Dividend go up and down completely randomly.

Pair Corralation between Putnam Convertible and Royce Dividend

Assuming the 90 days horizon Putnam Vertible Securities is expected to under-perform the Royce Dividend. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Vertible Securities is 1.23 times less risky than Royce Dividend. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Royce Dividend Value is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  591.00  in Royce Dividend Value on December 20, 2024 and sell it today you would lose (19.00) from holding Royce Dividend Value or give up 3.21% of portfolio value over 90 days.

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

Putnam Vertible Securities  vs.  Royce Dividend Value

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.

Royce Dividend Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Dividend Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Royce Dividend 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 Royce Dividend

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

The idea behind Putnam Vertible Securities and Royce Dividend 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.