Correlation Between Putnam Focused and Aqr Risk

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

By analyzing existing cross correlation between Putnam Focused Equity and Aqr Risk Parity, you can compare the effects of market volatilities on Putnam Focused and Aqr Risk 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 Aqr Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Focused and Aqr Risk.

Diversification Opportunities for Putnam Focused and Aqr Risk

-0.17

Correlation Coefficient

Putnam Focused  Aqr Risk

Good diversification

The 3 months correlation between Putnam and Aqr is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Equity and Aqr Risk Parity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Risk Parity 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 Equity are associated (or correlated) with Aqr Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Risk Parity has no effect on the direction of Putnam Focused i.e., Putnam Focused and Aqr Risk go up and down completely randomly.

Pair Corralation between Putnam Focused and Aqr Risk

Assuming the 90 days horizon Putnam Focused Equity is expected to under-perform the Aqr Risk. In addition to that, Putnam Focused is 2.57 times more volatile than Aqr Risk Parity. It trades about -0.08 of its total potential returns per unit of risk. Aqr Risk Parity is currently generating about 0.09 per unit of volatility. If you would invest  1,058  in Aqr Risk Parity on October 26, 2024 and sell it today you would earn a total of  24.00  from holding Aqr Risk Parity or generate 2.27% return on investment over 90 days.

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

Putnam Focused Equity  vs.  Aqr Risk Parity

Putnam Focused Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aqr Risk Parity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Risk Parity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aqr Risk 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 Focused and Aqr Risk

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

The idea behind Putnam Focused Equity and Aqr Risk Parity 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.