Correlation Between Putnam Global and Gold Bullion

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

Diversification Opportunities for Putnam Global and Gold Bullion

0.45

Correlation Coefficient

Putnam Global  Gold Bullion

Very weak diversification

The 3 months correlation between Putnam and Gold is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Technology and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion 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 Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Putnam Global i.e., Putnam Global and Gold Bullion go up and down completely randomly.

Pair Corralation between Putnam Global and Gold Bullion

Assuming the 90 days horizon Putnam Global Technology is expected to generate 1.12 times more return on investment than Gold Bullion. However, Putnam Global is 1.12 times more volatile than The Gold Bullion. It trades about 0.1 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.08 per unit of risk. If you would invest  7,060  in Putnam Global Technology on September 12, 2024 and sell it today you would earn a total of  508.00  from holding Putnam Global Technology or generate 7.2% return on investment over 90 days.

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

Putnam Global Technology  vs.  The Gold Bullion

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.

Gold Bullion

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gold Bullion is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnam Global and Gold Bullion

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

The idea behind Putnam Global Technology and The Gold Bullion 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.