Correlation Between Putnam Global and Franklin Small-mid

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

By analyzing existing cross correlation between Putnam Global Financials and Franklin Small Mid Cap, you can compare the effects of market volatilities on Putnam Global and Franklin Small-mid 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 Global with a short position of Franklin Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and Franklin Small-mid.

Diversification Opportunities for Putnam Global and Franklin Small-mid

0.21

Correlation Coefficient

Putnam Global  Franklin Small-mid

Modest diversification

The 3 months correlation between Putnam and Franklin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Financials and Franklin Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Mid and Putnam Global 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 Global Financials are associated (or correlated) with Franklin Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Mid has no effect on the direction of Putnam Global i.e., Putnam Global and Franklin Small-mid go up and down completely randomly.

Pair Corralation between Putnam Global and Franklin Small-mid

Assuming the 90 days horizon Putnam Global Financials is expected to generate 0.37 times more return on investment than Franklin Small-mid. However, Putnam Global Financials is 2.71 times less risky than Franklin Small-mid. It trades about 0.05 of its potential returns per unit of risk. Franklin Small Mid Cap is currently generating about -0.1 per unit of risk. If you would invest  1,034  in Putnam Global Financials on December 21, 2024 and sell it today you would earn a total of  15.00  from holding Putnam Global Financials or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Putnam Global Financials  vs.  Franklin Small Mid Cap

Putnam Global Financials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Financials are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Putnam Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Small Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Putnam Global and Franklin Small-mid

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

The idea behind Putnam Global Financials and Franklin Small Mid Cap 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.