Correlation Between Putnam Small and Putnam International

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

Diversification Opportunities for Putnam Small and Putnam International

-0.61

Correlation Coefficient

Putnam Small  Putnam International

Excellent diversification

The 3 months correlation between Putnam and Putnam is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and Putnam International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam International 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 Putnam International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam International has no effect on the direction of Putnam Small i.e., Putnam Small and Putnam International go up and down completely randomly.

Pair Corralation between Putnam Small and Putnam International

Assuming the 90 days horizon Putnam Small Cap is expected to under-perform the Putnam International. In addition to that, Putnam Small is 1.28 times more volatile than Putnam International Value. It trades about -0.09 of its total potential returns per unit of risk. Putnam International Value is currently generating about 0.22 per unit of volatility. If you would invest  1,335  in Putnam International Value on December 29, 2024 and sell it today you would earn a total of  163.00  from holding Putnam International Value or generate 12.21% return on investment over 90 days.

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

Putnam Small Cap  vs.  Putnam International Value

Putnam Small Cap

Risk-Adjusted Performance

Very Weak

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

Putnam International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam International Value are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Putnam Small and Putnam International

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

The idea behind Putnam Small Cap and Putnam International Value 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.