Correlation Between Putnam Convertible and Tiaa-cref Lifecycle

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

Diversification Opportunities for Putnam Convertible and Tiaa-cref Lifecycle

0.63

Correlation Coefficient

Putnam Convertible  Tiaa-cref Lifecycle

Poor diversification

The 3 months correlation between Putnam and Tiaa-cref is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Tiaa Cref Lifecycle Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Lifecycle 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 Tiaa-cref Lifecycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa Cref Lifecycle has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Tiaa-cref Lifecycle go up and down completely randomly.

Pair Corralation between Putnam Convertible and Tiaa-cref Lifecycle

Assuming the 90 days horizon Putnam Convertible is expected to generate 1.68 times less return on investment than Tiaa-cref Lifecycle. But when comparing it to its historical volatility, Putnam Convertible Incm Gwth is 1.29 times less risky than Tiaa-cref Lifecycle. It trades about 0.06 of its potential returns per unit of risk. Tiaa Cref Lifecycle Index is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,137  in Tiaa Cref Lifecycle Index on December 5, 2024 and sell it today you would earn a total of  282.00  from holding Tiaa Cref Lifecycle Index or generate 24.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.74%
Values	Daily Returns

Putnam Convertible Incm Gwth  vs.  Tiaa Cref Lifecycle Index

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.

Tiaa Cref Lifecycle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tiaa Cref Lifecycle Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Tiaa-cref Lifecycle 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 Tiaa-cref Lifecycle

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

The idea behind Putnam Convertible Incm Gwth and Tiaa Cref Lifecycle Index 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.