Correlation Between Prudential Health and Putnam Growth

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

By analyzing existing cross correlation between Prudential Health Sciences and Putnam Growth Opportunities, you can compare the effects of market volatilities on Prudential Health and Putnam Growth 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 Prudential Health with a short position of Putnam Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Health and Putnam Growth.

Diversification Opportunities for Prudential Health and Putnam Growth

0.08

Correlation Coefficient

Prudential Health  Putnam Growth

Significant diversification

The 3 months correlation between Prudential and Putnam is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Health Sciences and Putnam Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Growth Opport and Prudential Health 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 Prudential Health Sciences are associated (or correlated) with Putnam Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Growth Opport has no effect on the direction of Prudential Health i.e., Prudential Health and Putnam Growth go up and down completely randomly.

Pair Corralation between Prudential Health and Putnam Growth

Assuming the 90 days horizon Prudential Health is expected to generate 18.94 times less return on investment than Putnam Growth. In addition to that, Prudential Health is 1.03 times more volatile than Putnam Growth Opportunities. It trades about 0.01 of its total potential returns per unit of risk. Putnam Growth Opportunities is currently generating about 0.12 per unit of volatility. If you would invest  4,196  in Putnam Growth Opportunities on October 10, 2024 and sell it today you would earn a total of  3,433  from holding Putnam Growth Opportunities or generate 81.82% return on investment over 90 days.

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

Prudential Health Sciences  vs.  Putnam Growth Opportunities

Prudential Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Putnam Growth Opport

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Growth Opportunities are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Putnam Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Health and Putnam Growth

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

The idea behind Prudential Health Sciences and Putnam Growth Opportunities 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.