Correlation Between Putnam Tax and George Putnam

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

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

Diversification Opportunities for Putnam Tax and George Putnam

0.02

Correlation Coefficient

Putnam Tax  George Putnam

Significant diversification

The 3 months correlation between Putnam and George is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Tax Exempt and George Putnam Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Putnam Balanced and Putnam Tax 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 Tax Exempt are associated (or correlated) with George Putnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Putnam Balanced has no effect on the direction of Putnam Tax i.e., Putnam Tax and George Putnam go up and down completely randomly.

Pair Corralation between Putnam Tax and George Putnam

Assuming the 90 days horizon Putnam Tax Exempt is expected to generate 0.41 times more return on investment than George Putnam. However, Putnam Tax Exempt is 2.47 times less risky than George Putnam. It trades about -0.06 of its potential returns per unit of risk. George Putnam Balanced is currently generating about -0.08 per unit of risk. If you would invest  773.00  in Putnam Tax Exempt on December 29, 2024 and sell it today you would lose (8.00) from holding Putnam Tax Exempt or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Putnam Tax Exempt  vs.  George Putnam Balanced

Putnam Tax Exempt

Risk-Adjusted Performance

Very Weak

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

George Putnam Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days George Putnam Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, George Putnam 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 Tax and George Putnam

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

The idea behind Putnam Tax Exempt and George Putnam Balanced 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.