Correlation Between Putnam International and Putnam Dynamic

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

By analyzing existing cross correlation between Putnam International Equity and Putnam Dynamic Asset, you can compare the effects of market volatilities on Putnam International and Putnam Dynamic 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 Putnam Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam International and Putnam Dynamic.

Diversification Opportunities for Putnam International and Putnam Dynamic

0.45

Correlation Coefficient

Putnam International  Putnam Dynamic

Very weak diversification

The 3 months correlation between Putnam and Putnam is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Equity and Putnam Dynamic Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Dynamic Asset 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 Equity are associated (or correlated) with Putnam Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Dynamic Asset has no effect on the direction of Putnam International i.e., Putnam International and Putnam Dynamic go up and down completely randomly.

Pair Corralation between Putnam International and Putnam Dynamic

Assuming the 90 days horizon Putnam International Equity is expected to generate 0.85 times more return on investment than Putnam Dynamic. However, Putnam International Equity is 1.18 times less risky than Putnam Dynamic. It trades about -0.06 of its potential returns per unit of risk. Putnam Dynamic Asset is currently generating about -0.14 per unit of risk. If you would invest  2,628  in Putnam International Equity on September 22, 2024 and sell it today you would lose (28.00) from holding Putnam International Equity or give up 1.07% of portfolio value over 90 days.

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

Putnam International Equity  vs.  Putnam Dynamic Asset

Putnam International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam International Equity 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 Dynamic Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Dynamic Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putnam Dynamic 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 Putnam Dynamic

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

The idea behind Putnam International Equity and Putnam Dynamic Asset 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.