Correlation Between Putnam Diversified and The Fairholme

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

Diversification Opportunities for Putnam Diversified and The Fairholme

0.0

Correlation Coefficient

Putnam Diversified  The Fairholme

Pay attention - limited upside

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

Pair Corralation between Putnam Diversified and The Fairholme

If you would invest  2,901  in The Fairholme Fund on December 19, 2024 and sell it today you would earn a total of  195.00  from holding The Fairholme Fund or generate 6.72% return on investment over 90 days.

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

Putnam Diversified Income  vs.  The Fairholme Fund

Putnam Diversified Income

Risk-Adjusted Performance

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.

The Fairholme

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Fairholme may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Putnam Diversified and The Fairholme

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

The idea behind Putnam Diversified Income and The Fairholme Fund 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.