Correlation Between Putnam Sustainable and First Trust

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

Diversification Opportunities for Putnam Sustainable and First Trust

0.46

Correlation Coefficient

Putnam Sustainable  First Trust

Very weak diversification

The 3 months correlation between Putnam and First is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Sustainable Future and First Trust Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Putnam Sustainable i.e., Putnam Sustainable and First Trust go up and down completely randomly.

Pair Corralation between Putnam Sustainable and First Trust

Given the investment horizon of 90 days Putnam Sustainable Future is expected to under-perform the First Trust. In addition to that, Putnam Sustainable is 2.26 times more volatile than First Trust Exchange. It trades about -0.22 of its total potential returns per unit of risk. First Trust Exchange is currently generating about 0.01 per unit of volatility. If you would invest  2,763  in First Trust Exchange on October 10, 2024 and sell it today you would earn a total of  3.00  from holding First Trust Exchange or generate 0.11% return on investment over 90 days.

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

Putnam Sustainable Future  vs.  First Trust Exchange

Putnam Sustainable Future

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Sustainable Future are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

First Trust Exchange

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Putnam Sustainable and First Trust

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

The idea behind Putnam Sustainable Future and First Trust Exchange 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.