Correlation Between Balanced Strategy and Putnam Global

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

Diversification Opportunities for Balanced Strategy and Putnam Global

0.33

Correlation Coefficient

Balanced Strategy  Putnam Global

Weak diversification

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

Pair Corralation between Balanced Strategy and Putnam Global

Assuming the 90 days horizon Balanced Strategy is expected to generate 15.54 times less return on investment than Putnam Global. But when comparing it to its historical volatility, Balanced Strategy Fund is 1.46 times less risky than Putnam Global. It trades about 0.01 of its potential returns per unit of risk. Putnam Global Equity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,449  in Putnam Global Equity on December 21, 2024 and sell it today you would earn a total of  110.00  from holding Putnam Global Equity or generate 7.59% return on investment over 90 days.

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

Balanced Strategy Fund  vs.  Putnam Global Equity

Balanced Strategy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Strategy Fund are ranked lower than 1 (%) 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 Global Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Balanced Strategy and Putnam Global

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

The idea behind Balanced Strategy Fund and Putnam Global 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.