Correlation Between Putnam Convertible and Lkcm Small

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

Diversification Opportunities for Putnam Convertible and Lkcm Small

0.94

Correlation Coefficient

Putnam Convertible  Lkcm Small

Almost no diversification

The 3 months correlation between Putnam and Lkcm is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Lkcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Cap 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 Lkcm Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Cap has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Lkcm Small go up and down completely randomly.

Pair Corralation between Putnam Convertible and Lkcm Small

Assuming the 90 days horizon Putnam Convertible is expected to generate 1.44 times less return on investment than Lkcm Small. But when comparing it to its historical volatility, Putnam Convertible Incm Gwth is 2.39 times less risky than Lkcm Small. It trades about 0.34 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,070  in Lkcm Small Cap on September 3, 2024 and sell it today you would earn a total of  320.00  from holding Lkcm Small Cap or generate 15.46% return on investment over 90 days.

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

Putnam Convertible Incm Gwth  vs.  Lkcm Small Cap

Putnam Convertible Incm

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Incm Gwth are ranked lower than 26 (%) 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.

Lkcm Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lkcm Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Lkcm Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Putnam Convertible and Lkcm Small

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

The idea behind Putnam Convertible Incm Gwth and Lkcm Small Cap 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 Transaction History module to view history of all your transactions and understand their impact on performance.