Correlation Between Putnam Global and Putnam Sustainable

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

By analyzing existing cross correlation between Putnam Global Incm and Putnam Sustainable Future, you can compare the effects of market volatilities on Putnam Global and Putnam Sustainable 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 Putnam Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and Putnam Sustainable.

Diversification Opportunities for Putnam Global and Putnam Sustainable

-0.61

Correlation Coefficient

Putnam Global  Putnam Sustainable

Excellent diversification

The 3 months correlation between Putnam and Putnam is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Incm and Putnam Sustainable Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable Future 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 Incm are associated (or correlated) with Putnam Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable Future has no effect on the direction of Putnam Global i.e., Putnam Global and Putnam Sustainable go up and down completely randomly.

Pair Corralation between Putnam Global and Putnam Sustainable

Assuming the 90 days horizon Putnam Global Incm is expected to under-perform the Putnam Sustainable. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Global Incm is 3.46 times less risky than Putnam Sustainable. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Putnam Sustainable Future is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,194  in Putnam Sustainable Future on September 4, 2024 and sell it today you would earn a total of  256.00  from holding Putnam Sustainable Future or generate 11.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Putnam Global Incm  vs.  Putnam Sustainable Future

Putnam Global Incm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Incm has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putnam Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Sustainable Future

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Sustainable Future are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Sustainable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Global and Putnam Sustainable

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

The idea behind Putnam Global Incm and Putnam Sustainable Future 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.