Correlation Between Putnam Diversified and State Street

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

Diversification Opportunities for Putnam Diversified and State Street

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Correlation Coefficient

Putnam Diversified  State Street

Pay attention - limited upside

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

Pair Corralation between Putnam Diversified and State Street

Assuming the 90 days horizon Putnam Diversified is expected to generate 1.04 times less return on investment than State Street. But when comparing it to its historical volatility, Putnam Diversified Income is 2.13 times less risky than State Street. It trades about 0.06 of its potential returns per unit of risk. State Street Target is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  988.00  in State Street Target on October 11, 2024 and sell it today you would earn a total of  80.00  from holding State Street Target or generate 8.1% 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.  State Street Target

Putnam Diversified Income

Risk-Adjusted Performance

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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.

State Street Target

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Target has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Putnam Diversified and State Street

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

The idea behind Putnam Diversified Income and State Street Target 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 Commodity Directory module to find actively traded commodities issued by global exchanges.