Correlation Between Putnam Convertible and Large Cap

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

Diversification Opportunities for Putnam Convertible and Large Cap

-0.47

Correlation Coefficient

Putnam Convertible  Large Cap

Very good diversification

The 3 months correlation between Putnam and Large is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Large Cap International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap International 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap International has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Large Cap go up and down completely randomly.

Pair Corralation between Putnam Convertible and Large Cap

Assuming the 90 days horizon Putnam Convertible Incm Gwth is expected to under-perform the Large Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Convertible Incm Gwth is 1.02 times less risky than Large Cap. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Large Cap International is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,676  in Large Cap International on December 28, 2024 and sell it today you would earn a total of  245.00  from holding Large Cap International or generate 9.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Putnam Convertible Incm Gwth  vs.  Large Cap International

Putnam Convertible Incm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Putnam Convertible Incm Gwth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Putnam Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap International are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Putnam Convertible and Large Cap

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

The idea behind Putnam Convertible Incm Gwth and Large Cap International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.