Correlation Between Putnam Global and Putnam Multicap

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

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

Diversification Opportunities for Putnam Global and Putnam Multicap

-0.8

Correlation Coefficient

Putnam Global  Putnam Multicap

Pay attention - limited upside

The 3 months correlation between Putnam and Putnam is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Health and Putnam Multicap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Multicap Core 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 Health are associated (or correlated) with Putnam Multicap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Multicap Core has no effect on the direction of Putnam Global i.e., Putnam Global and Putnam Multicap go up and down completely randomly.

Pair Corralation between Putnam Global and Putnam Multicap

Assuming the 90 days horizon Putnam Global Health is expected to under-perform the Putnam Multicap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Global Health is 1.07 times less risky than Putnam Multicap. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Putnam Multicap Core is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,223  in Putnam Multicap Core on September 2, 2024 and sell it today you would earn a total of  418.00  from holding Putnam Multicap Core or generate 9.9% return on investment over 90 days.

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

Putnam Global Health  vs.  Putnam Multicap Core

Putnam Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Putnam Multicap Core

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Multicap Core are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Multicap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Putnam Global and Putnam Multicap

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

The idea behind Putnam Global Health and Putnam Multicap Core 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.