Correlation Between Putnam Short and Free Market

Can any of the company-specific risk be diversified away by investing in both Putnam Short and Free 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 Short and Free Market into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Putnam Short Duration and Free Market Fixed, you can compare the effects of market volatilities on Putnam Short and Free 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 Short with a short position of Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Short and Free Market.

Diversification Opportunities for Putnam Short and Free Market

0.0

Correlation Coefficient

Putnam Short  Free Market

Pay attention - limited upside

The 3 months correlation between Putnam and Free is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Short Duration and Free Market Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market Fixed and Putnam Short 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 Short Duration are associated (or correlated) with Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market Fixed has no effect on the direction of Putnam Short i.e., Putnam Short and Free Market go up and down completely randomly.

Pair Corralation between Putnam Short and Free Market

Assuming the 90 days horizon Putnam Short Duration is expected to generate 0.48 times more return on investment than Free Market. However, Putnam Short Duration is 2.09 times less risky than Free Market. It trades about 0.21 of its potential returns per unit of risk. Free Market Fixed is currently generating about 0.05 per unit of risk. If you would invest  914.00  in Putnam Short Duration on October 7, 2024 and sell it today you would earn a total of  98.00  from holding Putnam Short Duration or generate 10.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Putnam Short Duration  vs.  Free Market Fixed

Putnam Short Duration

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Short Duration are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Free Market Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Free Market Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Free 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 Short and Free Market

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

The idea behind Putnam Short Duration and Free Market Fixed 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.