Correlation Between Putnman Retirement and Mid Cap

Can any of the company-specific risk be diversified away by investing in both Putnman Retirement and Mid Cap 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 Putnman Retirement and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Putnman Retirement Ready and Mid Cap Spdr, you can compare the effects of market volatilities on Putnman Retirement and Mid Cap 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 Putnman Retirement with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnman Retirement and Mid Cap.

Diversification Opportunities for Putnman Retirement and Mid Cap

0.82

Correlation Coefficient

Putnman Retirement  Mid Cap

Very poor diversification

The 3 months correlation between Putnman and Mid is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Putnman Retirement Ready and Mid Cap Spdr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Spdr and Putnman Retirement 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 Putnman Retirement Ready are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Spdr has no effect on the direction of Putnman Retirement i.e., Putnman Retirement and Mid Cap go up and down completely randomly.

Pair Corralation between Putnman Retirement and Mid Cap

Assuming the 90 days horizon Putnman Retirement is expected to generate 6.13 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Putnman Retirement Ready is 1.82 times less risky than Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Mid Cap Spdr is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  56,974  in Mid Cap Spdr on October 21, 2024 and sell it today you would earn a total of  2,148  from holding Mid Cap Spdr or generate 3.77% return on investment over 90 days.

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

Putnman Retirement Ready  vs.  Mid Cap Spdr

Putnman Retirement Ready

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnman Retirement Ready has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Putnman Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mid Cap Spdr

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Spdr are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnman Retirement and Mid Cap

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

The idea behind Putnman Retirement Ready and Mid Cap Spdr 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.