Correlation Between Putnam Global and Power Global

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

Diversification Opportunities for Putnam Global and Power Global

0.7

Correlation Coefficient

Putnam Global  Power Global

Poor diversification

The 3 months correlation between Putnam and Power is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Financials and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical 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 Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of Putnam Global i.e., Putnam Global and Power Global go up and down completely randomly.

Pair Corralation between Putnam Global and Power Global

Assuming the 90 days horizon Putnam Global is expected to generate 1.16 times less return on investment than Power Global. But when comparing it to its historical volatility, Putnam Global Financials is 1.08 times less risky than Power Global. It trades about 0.07 of its potential returns per unit of risk. Power Global Tactical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  886.00  in Power Global Tactical on December 20, 2024 and sell it today you would earn a total of  188.00  from holding Power Global Tactical or generate 21.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	48.48%
Values	Daily Returns

Putnam Global Financials  vs.  Power Global Tactical

Putnam Global Financials

Risk-Adjusted Performance

Insignificant

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.

Power Global Tactical

Risk-Adjusted Performance

Weak

Over the last 90 days Power Global Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Power Global 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 Power Global

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

The idea behind Putnam Global Financials and Power Global Tactical 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.