Correlation Between Putnam Focused and FlexShares STOXX

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

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

Diversification Opportunities for Putnam Focused and FlexShares STOXX

0.33

Correlation Coefficient

Putnam Focused  FlexShares STOXX

Weak diversification

The 3 months correlation between Putnam and FlexShares is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global and Putnam Focused 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 Focused Large are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of Putnam Focused i.e., Putnam Focused and FlexShares STOXX go up and down completely randomly.

Pair Corralation between Putnam Focused and FlexShares STOXX

Given the investment horizon of 90 days Putnam Focused Large is expected to generate 1.03 times more return on investment than FlexShares STOXX. However, Putnam Focused is 1.03 times more volatile than FlexShares STOXX Global. It trades about 0.09 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.09 per unit of risk. If you would invest  2,716  in Putnam Focused Large on October 7, 2024 and sell it today you would earn a total of  1,014  from holding Putnam Focused Large or generate 37.33% return on investment over 90 days.

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

Putnam Focused Large  vs.  FlexShares STOXX Global

Putnam Focused Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Focused Large has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Putnam Focused is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

FlexShares STOXX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares STOXX Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, FlexShares STOXX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Putnam Focused and FlexShares STOXX

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

The idea behind Putnam Focused Large and FlexShares STOXX Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.