Correlation Between Putnam Convertible and Fidelity Stock

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

Diversification Opportunities for Putnam Convertible and Fidelity Stock

0.98

Correlation Coefficient

Putnam Convertible  Fidelity Stock

Almost no diversification

The 3 months correlation between Putnam and Fidelity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Fidelity Stock Selector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Stock Selector 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 Fidelity Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Stock Selector has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Fidelity Stock go up and down completely randomly.

Pair Corralation between Putnam Convertible and Fidelity Stock

Assuming the 90 days horizon Putnam Convertible Incm Gwth is expected to under-perform the Fidelity Stock. But the mutual fund apears to be less risky and, when comparing its historical volatility, Putnam Convertible Incm Gwth is 1.35 times less risky than Fidelity Stock. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Fidelity Stock Selector is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  8,708  in Fidelity Stock Selector on September 24, 2024 and sell it today you would lose (140.00) from holding Fidelity Stock Selector or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Putnam Convertible Incm Gwth  vs.  Fidelity Stock Selector

Putnam Convertible Incm

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Incm Gwth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. 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.

Fidelity Stock Selector

Risk-Adjusted Performance

7 of 100

Modest

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

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

The idea behind Putnam Convertible Incm Gwth and Fidelity Stock Selector 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.