Correlation Between Putnam Convertible and Sarofim Equity

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

Diversification Opportunities for Putnam Convertible and Sarofim Equity

0.5

Correlation Coefficient

Putnam Convertible  Sarofim Equity

Very weak diversification

The 3 months correlation between Putnam and Sarofim is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Vertible Securities and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity 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 Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Sarofim Equity go up and down completely randomly.

Pair Corralation between Putnam Convertible and Sarofim Equity

Assuming the 90 days horizon Putnam Vertible Securities is expected to generate 0.37 times more return on investment than Sarofim Equity. However, Putnam Vertible Securities is 2.69 times less risky than Sarofim Equity. It trades about -0.1 of its potential returns per unit of risk. Sarofim Equity is currently generating about -0.14 per unit of risk. If you would invest  2,590  in Putnam Vertible Securities on December 20, 2024 and sell it today you would lose (125.00) from holding Putnam Vertible Securities or give up 4.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Putnam Vertible Securities  vs.  Sarofim Equity

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.

Sarofim Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sarofim Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Putnam Convertible and Sarofim Equity

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

The idea behind Putnam Vertible Securities and Sarofim Equity 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.