Correlation Between Putnam Diversified and Large Cap

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

By analyzing existing cross correlation between Putnam Diversified Income and Large Cap International, you can compare the effects of market volatilities on Putnam Diversified and Large 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 Putnam Diversified with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Diversified and Large Cap.

Diversification Opportunities for Putnam Diversified and Large Cap

0.0

Correlation Coefficient

Putnam Diversified  Large Cap

Pay attention - limited upside

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

Pair Corralation between Putnam Diversified and Large Cap

If you would invest  2,772  in Large Cap International on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Large Cap International or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Putnam Diversified Income  vs.  Large Cap International

Putnam Diversified Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Large Cap International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Large 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 Putnam Diversified and Large Cap

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

The idea behind Putnam Diversified Income and Large Cap International 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.