Correlation Between Putnam Global and Clipper Fund

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

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

Diversification Opportunities for Putnam Global and Clipper Fund

0.81

Correlation Coefficient

Putnam Global  Clipper Fund

Very poor diversification

The 3 months correlation between Putnam and Clipper is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Technology and Clipper Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clipper Fund 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 Technology are associated (or correlated) with Clipper Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clipper Fund has no effect on the direction of Putnam Global i.e., Putnam Global and Clipper Fund go up and down completely randomly.

Pair Corralation between Putnam Global and Clipper Fund

Assuming the 90 days horizon Putnam Global is expected to generate 1.49 times less return on investment than Clipper Fund. In addition to that, Putnam Global is 1.24 times more volatile than Clipper Fund Inc. It trades about 0.1 of its total potential returns per unit of risk. Clipper Fund Inc is currently generating about 0.19 per unit of volatility. If you would invest  13,915  in Clipper Fund Inc on September 12, 2024 and sell it today you would earn a total of  1,573  from holding Clipper Fund Inc or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Putnam Global Technology  vs.  Clipper Fund Inc

Putnam Global Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Technology are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clipper Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clipper Fund Inc are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Clipper Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Global and Clipper Fund

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

The idea behind Putnam Global Technology and Clipper Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.