Correlation Between Putnam International and Us Government

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

Diversification Opportunities for Putnam International and Us Government

0.78

Correlation Coefficient

Putnam International  Us Government

Poor diversification

The 3 months correlation between PUTNAM and GVPIX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Putnam International Equity and Us Government Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Plus 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 Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Plus has no effect on the direction of Putnam International i.e., Putnam International and Us Government go up and down completely randomly.

Pair Corralation between Putnam International and Us Government

Assuming the 90 days horizon Putnam International Equity is expected to generate 0.98 times more return on investment than Us Government. However, Putnam International Equity is 1.03 times less risky than Us Government. It trades about 0.21 of its potential returns per unit of risk. Us Government Plus is currently generating about 0.1 per unit of risk. If you would invest  2,525  in Putnam International Equity on December 21, 2024 and sell it today you would earn a total of  292.00  from holding Putnam International Equity or generate 11.56% return on investment over 90 days.

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

Putnam International Equity  vs.  Us Government Plus

Putnam International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam International Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Us Government Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Plus are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Us Government 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 Us Government

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

The idea behind Putnam International Equity and Us Government Plus 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.