Correlation Between Pax Global and Putnam Focused

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

By analyzing existing cross correlation between Pax Global Environmental and Putnam Focused Large, you can compare the effects of market volatilities on Pax Global and Putnam Focused 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 Pax Global with a short position of Putnam Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Global and Putnam Focused.

Diversification Opportunities for Pax Global and Putnam Focused

-0.51

Correlation Coefficient

Pax Global  Putnam Focused

Excellent diversification

The 3 months correlation between Pax and Putnam is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Pax Global Environmental and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large and Pax 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 Pax Global Environmental are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of Pax Global i.e., Pax Global and Putnam Focused go up and down completely randomly.

Pair Corralation between Pax Global and Putnam Focused

Assuming the 90 days horizon Pax Global Environmental is expected to under-perform the Putnam Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pax Global Environmental is 1.2 times less risky than Putnam Focused. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Putnam Focused Large is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,769  in Putnam Focused Large on October 22, 2024 and sell it today you would earn a total of  149.90  from holding Putnam Focused Large or generate 3.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Pax Global Environmental  vs.  Putnam Focused Large

Pax Global Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Focused Large

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Putnam Focused is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pax Global and Putnam Focused

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

The idea behind Pax Global Environmental and Putnam Focused Large 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.