Correlation Between Putnam Convertible and Aquila Tax

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

By analyzing existing cross correlation between Putnam Convertible Incm Gwth and Aquila Tax Free Fund, you can compare the effects of market volatilities on Putnam Convertible and Aquila Tax 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 Convertible with a short position of Aquila Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Convertible and Aquila Tax.

Diversification Opportunities for Putnam Convertible and Aquila Tax

0.18

Correlation Coefficient

Putnam Convertible  Aquila Tax

Average diversification

The 3 months correlation between Putnam and Aquila is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Aquila Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free and Putnam Convertible 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 Convertible Incm Gwth are associated (or correlated) with Aquila Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Aquila Tax go up and down completely randomly.

Pair Corralation between Putnam Convertible and Aquila Tax

Assuming the 90 days horizon Putnam Convertible Incm Gwth is expected to generate 2.39 times more return on investment than Aquila Tax. However, Putnam Convertible is 2.39 times more volatile than Aquila Tax Free Fund. It trades about 0.23 of its potential returns per unit of risk. Aquila Tax Free Fund is currently generating about 0.01 per unit of risk. If you would invest  2,415  in Putnam Convertible Incm Gwth on September 14, 2024 and sell it today you would earn a total of  178.00  from holding Putnam Convertible Incm Gwth or generate 7.37% return on investment over 90 days.

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

Putnam Convertible Incm Gwth  vs.  Aquila Tax Free Fund

Putnam Convertible Incm

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Incm Gwth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Putnam Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aquila Tax Free

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Aquila Tax Free Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aquila Tax 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 Convertible and Aquila Tax

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

The idea behind Putnam Convertible Incm Gwth and Aquila Tax Free Fund 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.