Correlation Between Putnam International and Balanced Fund

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

By analyzing existing cross correlation between Putnam International Value and Balanced Fund Retail, you can compare the effects of market volatilities on Putnam International and Balanced 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 International with a short position of Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam International and Balanced Fund.

Diversification Opportunities for Putnam International and Balanced Fund

-0.18

Correlation Coefficient

Putnam International  Balanced Fund

Good diversification

The 3 months correlation between Putnam and Balanced is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Value and Balanced Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Retail and Putnam International 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 International Value are associated (or correlated) with Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Retail has no effect on the direction of Putnam International i.e., Putnam International and Balanced Fund go up and down completely randomly.

Pair Corralation between Putnam International and Balanced Fund

Assuming the 90 days horizon Putnam International Value is expected to generate 1.25 times more return on investment than Balanced Fund. However, Putnam International is 1.25 times more volatile than Balanced Fund Retail. It trades about 0.22 of its potential returns per unit of risk. Balanced Fund Retail is currently generating about -0.06 per unit of risk. If you would invest  1,335  in Putnam International Value on December 29, 2024 and sell it today you would earn a total of  163.00  from holding Putnam International Value or generate 12.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Putnam International Value  vs.  Balanced Fund Retail

Putnam International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam International Value are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Balanced Fund Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Balanced Fund Retail has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Balanced Fund 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 International and Balanced Fund

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

The idea behind Putnam International Value and Balanced Fund Retail 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.