Correlation Between Putnam International and Putnam U

Can any of the company-specific risk be diversified away by investing in both Putnam International and Putnam U 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 U 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 U S, you can compare the effects of market volatilities on Putnam International and Putnam U 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 U. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam International and Putnam U.

Diversification Opportunities for Putnam International and Putnam U

0.69

Correlation Coefficient

Putnam International  Putnam U

Poor diversification

The 3 months correlation between Putnam and Putnam is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Equity and Putnam U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam U S 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 U. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam U S has no effect on the direction of Putnam International i.e., Putnam International and Putnam U go up and down completely randomly.

Pair Corralation between Putnam International and Putnam U

Assuming the 90 days horizon Putnam International Equity is expected to under-perform the Putnam U. In addition to that, Putnam International is 2.26 times more volatile than Putnam U S. It trades about -0.14 of its total potential returns per unit of risk. Putnam U S is currently generating about -0.08 per unit of volatility. If you would invest  853.00  in Putnam U S on September 21, 2024 and sell it today you would lose (15.00) from holding Putnam U S or give up 1.76% of portfolio value over 90 days.

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

Putnam International Equity  vs.  Putnam U S

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 U S

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Putnam International Equity and Putnam U S 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.