Correlation Between Putnam Focused and Vanguard Growth

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

Diversification Opportunities for Putnam Focused and Vanguard Growth

0.99

Correlation Coefficient

Putnam Focused  Vanguard Growth

No risk reduction

The 3 months correlation between Putnam and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Putnam Focused i.e., Putnam Focused and Vanguard Growth go up and down completely randomly.

Pair Corralation between Putnam Focused and Vanguard Growth

Given the investment horizon of 90 days Putnam Focused is expected to generate 1.05 times less return on investment than Vanguard Growth. In addition to that, Putnam Focused is 1.02 times more volatile than Vanguard Growth Index. It trades about 0.14 of its total potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.15 per unit of volatility. If you would invest  38,139  in Vanguard Growth Index on September 22, 2024 and sell it today you would earn a total of  3,639  from holding Vanguard Growth Index or generate 9.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Putnam Focused Large  vs.  Vanguard Growth Index

Putnam Focused Large

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Putnam Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Growth Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Focused and Vanguard Growth

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

The idea behind Putnam Focused Large and Vanguard Growth Index 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.