Correlation Between Putnam International and Putnam Focused

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

Diversification Opportunities for Putnam International and Putnam Focused

-0.47

Correlation Coefficient

Putnam International  Putnam Focused

Very good diversification

The 3 months correlation between Putnam and Putnam is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Equity and Putnam Focused Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Equity 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 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 Equity has no effect on the direction of Putnam International i.e., Putnam International and Putnam Focused go up and down completely randomly.

Pair Corralation between Putnam International and Putnam Focused

Assuming the 90 days horizon Putnam International Equity is expected to under-perform the Putnam Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam International Equity is 1.84 times less risky than Putnam Focused. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Putnam Focused Equity is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,660  in Putnam Focused Equity on September 14, 2024 and sell it today you would lose (17.00) from holding Putnam Focused Equity or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Putnam International Equity  vs.  Putnam Focused Equity

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 fairly strong basic indicators, Putnam International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Focused Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Putnam International and Putnam Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam International 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 International Equity and Putnam Focused Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.