Correlation Between Putnam Global and Fidelity Freedom

Can any of the company-specific risk be diversified away by investing in both Putnam Global and Fidelity Freedom 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 Fidelity Freedom 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 Fidelity Freedom 2050, you can compare the effects of market volatilities on Putnam Global and Fidelity Freedom 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 Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and Fidelity Freedom.

Diversification Opportunities for Putnam Global and Fidelity Freedom

0.75

Correlation Coefficient

Putnam Global  Fidelity Freedom

Poor diversification

The 3 months correlation between Putnam and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Financials and Fidelity Freedom 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom 2050 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 Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom 2050 has no effect on the direction of Putnam Global i.e., Putnam Global and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Putnam Global and Fidelity Freedom

Assuming the 90 days horizon Putnam Global Financials is expected to generate 0.64 times more return on investment than Fidelity Freedom. However, Putnam Global Financials is 1.56 times less risky than Fidelity Freedom. It trades about -0.35 of its potential returns per unit of risk. Fidelity Freedom 2050 is currently generating about -0.24 per unit of risk. If you would invest  1,079  in Putnam Global Financials on October 11, 2024 and sell it today you would lose (47.00) from holding Putnam Global Financials or give up 4.36% of portfolio value over 90 days.

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

Putnam Global Financials  vs.  Fidelity Freedom 2050

Putnam Global Financials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Financials has generated negative risk-adjusted returns adding no value to fund investors. 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.

Fidelity Freedom 2050

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Freedom 2050 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Fidelity Freedom 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 Global and Fidelity Freedom

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

The idea behind Putnam Global Financials and Fidelity Freedom 2050 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.