Correlation Between Balanced Strategy and Putnam High

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

By analyzing existing cross correlation between Balanced Strategy Fund and Putnam High Yield, you can compare the effects of market volatilities on Balanced Strategy and Putnam High 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 Balanced Strategy with a short position of Putnam High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Putnam High.

Diversification Opportunities for Balanced Strategy and Putnam High

0.67

Correlation Coefficient

Balanced Strategy  Putnam High

Poor diversification

The 3 months correlation between Balanced and Putnam is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy Fund and Putnam High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam High Yield and Balanced Strategy 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 Balanced Strategy Fund are associated (or correlated) with Putnam High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam High Yield has no effect on the direction of Balanced Strategy i.e., Balanced Strategy and Putnam High go up and down completely randomly.

Pair Corralation between Balanced Strategy and Putnam High

Assuming the 90 days horizon Balanced Strategy Fund is expected to generate 1.95 times more return on investment than Putnam High. However, Balanced Strategy is 1.95 times more volatile than Putnam High Yield. It trades about 0.07 of its potential returns per unit of risk. Putnam High Yield is currently generating about 0.11 per unit of risk. If you would invest  880.00  in Balanced Strategy Fund on October 25, 2024 and sell it today you would earn a total of  164.00  from holding Balanced Strategy Fund or generate 18.64% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Putnam High Yield

Balanced Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

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

Putnam High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Strategy and Putnam High

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

The idea behind Balanced Strategy Fund and Putnam High Yield 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.