Correlation Between Putnam Small and Putnam Multi

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

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

Diversification Opportunities for Putnam Small and Putnam Multi

0.65

Correlation Coefficient

Putnam Small  Putnam Multi

Poor diversification

The 3 months correlation between Putnam and Putnam is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and Putnam Multi Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Multi Cap and Putnam Small 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 Small Cap are associated (or correlated) with Putnam Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Multi Cap has no effect on the direction of Putnam Small i.e., Putnam Small and Putnam Multi go up and down completely randomly.

Pair Corralation between Putnam Small and Putnam Multi

Assuming the 90 days horizon Putnam Small Cap is expected to under-perform the Putnam Multi. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Small Cap is 1.04 times less risky than Putnam Multi. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Putnam Multi Cap Value is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,129  in Putnam Multi Cap Value on October 8, 2024 and sell it today you would lose (89.00) from holding Putnam Multi Cap Value or give up 4.18% of portfolio value over 90 days.

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

Putnam Small Cap  vs.  Putnam Multi Cap Value

Putnam Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Multi Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Multi Cap Value 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.

Pair Trading with Putnam Small and Putnam Multi

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

The idea behind Putnam Small Cap and Putnam Multi Cap Value 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.