Correlation Between Putnam Tax and Cutler Equity

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Can any of the company-specific risk be diversified away by investing in both Putnam Tax and Cutler Equity 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 Tax and Cutler Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Tax Exempt and Cutler Equity, you can compare the effects of market volatilities on Putnam Tax and Cutler Equity 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 Tax with a short position of Cutler Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Tax and Cutler Equity.

Diversification Opportunities for Putnam Tax and Cutler Equity

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Putnam and Cutler is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Tax Exempt and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity and Putnam Tax 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 Tax Exempt are associated (or correlated) with Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Putnam Tax i.e., Putnam Tax and Cutler Equity go up and down completely randomly.

Pair Corralation between Putnam Tax and Cutler Equity

Assuming the 90 days horizon Putnam Tax is expected to generate 5.05 times less return on investment than Cutler Equity. But when comparing it to its historical volatility, Putnam Tax Exempt is 2.9 times less risky than Cutler Equity. It trades about 0.02 of its potential returns per unit of risk. Cutler Equity is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,453  in Cutler Equity on October 6, 2024 and sell it today you would earn a total of  175.00  from holding Cutler Equity or generate 7.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

Putnam Tax Exempt  vs.  Cutler Equity

 Performance 
       Timeline  
Putnam Tax Exempt 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Putnam Tax and Cutler Equity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Putnam Tax and Cutler Equity

The main advantage of trading using opposite Putnam Tax and Cutler Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Tax position performs unexpectedly, Cutler Equity 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 Cutler Equity will offset losses from the drop in Cutler Equity's long position.
The idea behind Putnam Tax Exempt and Cutler Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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