Correlation Between Putnam Small and Rice Hall

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

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

Diversification Opportunities for Putnam Small and Rice Hall

0.81

Correlation Coefficient

Putnam Small  Rice Hall

Very poor diversification

The 3 months correlation between Putnam and Rice is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and Rice Hall James in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rice Hall James and Putnam Small 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 Small Cap are associated (or correlated) with Rice Hall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rice Hall James has no effect on the direction of Putnam Small i.e., Putnam Small and Rice Hall go up and down completely randomly.

Pair Corralation between Putnam Small and Rice Hall

Assuming the 90 days horizon Putnam Small Cap is expected to generate 0.81 times more return on investment than Rice Hall. However, Putnam Small Cap is 1.23 times less risky than Rice Hall. It trades about 0.04 of its potential returns per unit of risk. Rice Hall James is currently generating about -0.02 per unit of risk. If you would invest  1,273  in Putnam Small Cap on October 8, 2024 and sell it today you would earn a total of  302.00  from holding Putnam Small Cap or generate 23.72% return on investment over 90 days.

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

Putnam Small Cap  vs.  Rice Hall James

Putnam Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rice Hall James

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rice Hall James has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rice Hall 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 Small and Rice Hall

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

The idea behind Putnam Small Cap and Rice Hall James 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.