Correlation Between Putnam Sustainable and Sterling Capital

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

By analyzing existing cross correlation between Putnam Sustainable Future and Sterling Capital Focus, you can compare the effects of market volatilities on Putnam Sustainable and Sterling Capital 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 Sustainable with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Sustainable and Sterling Capital.

Diversification Opportunities for Putnam Sustainable and Sterling Capital

0.81

Correlation Coefficient

Putnam Sustainable  Sterling Capital

Very poor diversification

The 3 months correlation between Putnam and Sterling is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Sustainable Future and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus and Putnam Sustainable 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 Sustainable Future are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of Putnam Sustainable i.e., Putnam Sustainable and Sterling Capital go up and down completely randomly.

Pair Corralation between Putnam Sustainable and Sterling Capital

Given the investment horizon of 90 days Putnam Sustainable Future is expected to under-perform the Sterling Capital. But the etf apears to be less risky and, when comparing its historical volatility, Putnam Sustainable Future is 1.12 times less risky than Sterling Capital. The etf trades about -0.32 of its potential returns per unit of risk. The Sterling Capital Focus is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  3,150  in Sterling Capital Focus on October 4, 2024 and sell it today you would lose (189.00) from holding Sterling Capital Focus or give up 6.0% of portfolio value over 90 days.

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

Putnam Sustainable Future  vs.  Sterling Capital Focus

Putnam Sustainable Future

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Sustainable Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Putnam Sustainable is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sterling Capital Focus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Focus are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Putnam Sustainable and Sterling Capital

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

The idea behind Putnam Sustainable Future and Sterling Capital Focus 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 Anywhere module to track or share privately all of your investments from the convenience of any device.