Correlation Between Putnam Global and Madison Core

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

Diversification Opportunities for Putnam Global and Madison Core

0.79

Correlation Coefficient

Putnam Global  Madison Core

Poor diversification

The 3 months correlation between Putnam and Madison is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Financials and Madison E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison E Bond 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 Madison Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison E Bond has no effect on the direction of Putnam Global i.e., Putnam Global and Madison Core go up and down completely randomly.

Pair Corralation between Putnam Global and Madison Core

Assuming the 90 days horizon Putnam Global Financials is expected to generate 1.25 times more return on investment than Madison Core. However, Putnam Global is 1.25 times more volatile than Madison E Bond. It trades about 0.06 of its potential returns per unit of risk. Madison E Bond is currently generating about 0.02 per unit of risk. If you would invest  985.00  in Putnam Global Financials on October 11, 2024 and sell it today you would earn a total of  52.00  from holding Putnam Global Financials or generate 5.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	39.19%
Values	Daily Returns

Putnam Global Financials  vs.  Madison E Bond

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.

Madison E Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison E Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Madison Core 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 Madison Core

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

The idea behind Putnam Global Financials and Madison E Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.