Correlation Between Putnam Sustainable and Overlay Shares

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

Diversification Opportunities for Putnam Sustainable and Overlay Shares

0.84

Correlation Coefficient

Putnam Sustainable  Overlay Shares

Very poor diversification

The 3 months correlation between Putnam and Overlay is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Sustainable Future and Overlay Shares Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Hedged 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 Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Hedged has no effect on the direction of Putnam Sustainable i.e., Putnam Sustainable and Overlay Shares go up and down completely randomly.

Pair Corralation between Putnam Sustainable and Overlay Shares

Given the investment horizon of 90 days Putnam Sustainable Future is expected to generate 1.65 times more return on investment than Overlay Shares. However, Putnam Sustainable is 1.65 times more volatile than Overlay Shares Hedged. It trades about 0.07 of its potential returns per unit of risk. Overlay Shares Hedged is currently generating about 0.1 per unit of risk. If you would invest  1,763  in Putnam Sustainable Future on October 4, 2024 and sell it today you would earn a total of  713.00  from holding Putnam Sustainable Future or generate 40.44% return on investment over 90 days.

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

Putnam Sustainable Future  vs.  Overlay Shares Hedged

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Overlay Shares Hedged

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Overlay Shares Hedged are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Overlay Shares is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Putnam Sustainable and Overlay Shares

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

The idea behind Putnam Sustainable Future and Overlay Shares Hedged 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.