Correlation Between Putnam Sustainable and Putnam Focused

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

By analyzing existing cross correlation between Putnam Sustainable Leaders and Putnam Focused Large, you can compare the effects of market volatilities on Putnam Sustainable and Putnam Focused 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 Sustainable with a short position of Putnam Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Sustainable and Putnam Focused.

Diversification Opportunities for Putnam Sustainable and Putnam Focused

0.75

Correlation Coefficient

Putnam Sustainable  Putnam Focused

Poor diversification

The 3 months correlation between Putnam and Putnam is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Sustainable Leaders and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large and Putnam Sustainable 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 Sustainable Leaders are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of Putnam Sustainable i.e., Putnam Sustainable and Putnam Focused go up and down completely randomly.

Pair Corralation between Putnam Sustainable and Putnam Focused

Given the investment horizon of 90 days Putnam Sustainable Leaders is expected to generate 1.07 times more return on investment than Putnam Focused. However, Putnam Sustainable is 1.07 times more volatile than Putnam Focused Large. It trades about 0.1 of its potential returns per unit of risk. Putnam Focused Large is currently generating about 0.08 per unit of risk. If you would invest  2,216  in Putnam Sustainable Leaders on October 4, 2024 and sell it today you would earn a total of  1,118  from holding Putnam Sustainable Leaders or generate 50.45% return on investment over 90 days.

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

Putnam Sustainable Leaders  vs.  Putnam Focused Large

Putnam Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Sustainable Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Putnam Sustainable is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Putnam Focused Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Focused Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Putnam Focused is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Putnam Sustainable and Putnam Focused

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

The idea behind Putnam Sustainable Leaders and Putnam Focused Large 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.