Correlation Between Putnam Focused and DOLLAR

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

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

Diversification Opportunities for Putnam Focused and DOLLAR

-0.58

Correlation Coefficient

Putnam Focused  DOLLAR

Excellent diversification

The 3 months correlation between Putnam and DOLLAR is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and DOLLAR TREE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE INC and Putnam Focused 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 Focused Large are associated (or correlated) with DOLLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE INC has no effect on the direction of Putnam Focused i.e., Putnam Focused and DOLLAR go up and down completely randomly.

Pair Corralation between Putnam Focused and DOLLAR

Given the investment horizon of 90 days Putnam Focused Large is expected to generate 3.08 times more return on investment than DOLLAR. However, Putnam Focused is 3.08 times more volatile than DOLLAR TREE INC. It trades about 0.13 of its potential returns per unit of risk. DOLLAR TREE INC is currently generating about 0.01 per unit of risk. If you would invest  2,006  in Putnam Focused Large on September 29, 2024 and sell it today you would earn a total of  2,011  from holding Putnam Focused Large or generate 100.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Putnam Focused Large  vs.  DOLLAR TREE INC

Putnam Focused Large

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Putnam Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DOLLAR TREE INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DOLLAR TREE INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DOLLAR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnam Focused and DOLLAR

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

The idea behind Putnam Focused Large and DOLLAR TREE INC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.