Correlation Between Putnam Convertible and Vanguard European

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

Diversification Opportunities for Putnam Convertible and Vanguard European

-0.28

Correlation Coefficient

Putnam Convertible  Vanguard European

Very good diversification

The 3 months correlation between Putnam and Vanguard is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Vertible Securities and Vanguard European Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard European Stock 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 Vanguard European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard European Stock has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Vanguard European go up and down completely randomly.

Pair Corralation between Putnam Convertible and Vanguard European

Assuming the 90 days horizon Putnam Vertible Securities is expected to generate 0.8 times more return on investment than Vanguard European. However, Putnam Vertible Securities is 1.24 times less risky than Vanguard European. It trades about 0.12 of its potential returns per unit of risk. Vanguard European Stock is currently generating about -0.03 per unit of risk. If you would invest  2,526  in Putnam Vertible Securities on October 25, 2024 and sell it today you would earn a total of  117.00  from holding Putnam Vertible Securities or generate 4.63% return on investment over 90 days.

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

Putnam Vertible Securities  vs.  Vanguard European Stock

Putnam Vertible Secu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Vertible Securities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Vanguard European Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard European Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard European 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 Vanguard European

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

The idea behind Putnam Vertible Securities and Vanguard European Stock 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.