Correlation Between Putnam Convertible and Money Market

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

Diversification Opportunities for Putnam Convertible and Money Market

-0.38

Correlation Coefficient

Putnam Convertible  Money Market

Very good diversification

The 3 months correlation between Putnam and Money is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Incm Gwth and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations 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 Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Money Market go up and down completely randomly.

Pair Corralation between Putnam Convertible and Money Market

Assuming the 90 days horizon Putnam Convertible is expected to generate 136.5 times less return on investment than Money Market. But when comparing it to its historical volatility, Putnam Convertible Incm Gwth is 97.52 times less risky than Money Market. It trades about 0.08 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  378.00  in Money Market Obligations on September 20, 2024 and sell it today you would lose (278.00) from holding Money Market Obligations or give up 73.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.94%
Values	Daily Returns

Putnam Convertible Incm Gwth  vs.  Money Market Obligations

Putnam Convertible Incm

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Incm Gwth are ranked lower than 6 (%) 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.

Money Market Obligations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Money Market Obligations has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Money Market 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 Money Market

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

The idea behind Putnam Convertible Incm Gwth and Money Market Obligations 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.