Correlation Between Putnam Short and Federated Premier

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

Diversification Opportunities for Putnam Short and Federated Premier

-0.72

Correlation Coefficient

Putnam Short  Federated Premier

Pay attention - limited upside

The 3 months correlation between Putnam and Federated is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Short Duration and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier 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 Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Putnam Short i.e., Putnam Short and Federated Premier go up and down completely randomly.

Pair Corralation between Putnam Short and Federated Premier

Assuming the 90 days horizon Putnam Short is expected to generate 1.22 times less return on investment than Federated Premier. But when comparing it to its historical volatility, Putnam Short Duration is 6.59 times less risky than Federated Premier. It trades about 0.21 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  974.00  in Federated Premier Municipal on September 23, 2024 and sell it today you would earn a total of  121.00  from holding Federated Premier Municipal or generate 12.42% return on investment over 90 days.

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

Putnam Short Duration  vs.  Federated Premier Municipal

Putnam Short Duration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Short Duration are ranked lower than 9 (%) 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.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Putnam Short and Federated Premier

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

The idea behind Putnam Short Duration and Federated Premier Municipal 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.