Correlation Between Putnam Convertible and Mfs Utilities

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

Diversification Opportunities for Putnam Convertible and Mfs Utilities

0.65

Correlation Coefficient

Putnam Convertible  Mfs Utilities

Poor diversification

The 3 months correlation between Putnam and Mfs is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities 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 Mfs Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Mfs Utilities go up and down completely randomly.

Pair Corralation between Putnam Convertible and Mfs Utilities

Assuming the 90 days horizon Putnam Convertible Incm Gwth is expected to generate 0.67 times more return on investment than Mfs Utilities. However, Putnam Convertible Incm Gwth is 1.5 times less risky than Mfs Utilities. It trades about -0.1 of its potential returns per unit of risk. Mfs Utilities Fund is currently generating about -0.1 per unit of risk. If you would invest  2,608  in Putnam Convertible Incm Gwth on December 1, 2024 and sell it today you would lose (104.00) from holding Putnam Convertible Incm Gwth or give up 3.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Putnam Convertible Incm Gwth  vs.  Mfs Utilities Fund

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.

Mfs Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mfs Utilities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Putnam Convertible and Mfs Utilities

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

The idea behind Putnam Convertible Incm Gwth and Mfs Utilities 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.