Correlation Between Commodities Strategy and Putnam Retirement

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

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

Diversification Opportunities for Commodities Strategy and Putnam Retirement

-0.29

Correlation Coefficient

Commodities Strategy  Putnam Retirement

Very good diversification

The 3 months correlation between Commodities and Putnam is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund and Putnam Retirement Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Retirement and Commodities 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 Commodities Strategy Fund are associated (or correlated) with Putnam Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Retirement has no effect on the direction of Commodities Strategy i.e., Commodities Strategy and Putnam Retirement go up and down completely randomly.

Pair Corralation between Commodities Strategy and Putnam Retirement

Assuming the 90 days horizon Commodities Strategy Fund is expected to generate 0.42 times more return on investment than Putnam Retirement. However, Commodities Strategy Fund is 2.36 times less risky than Putnam Retirement. It trades about 0.18 of its potential returns per unit of risk. Putnam Retirement Advantage is currently generating about -0.28 per unit of risk. If you would invest  2,943  in Commodities Strategy Fund on October 4, 2024 and sell it today you would earn a total of  69.00  from holding Commodities Strategy Fund or generate 2.34% return on investment over 90 days.

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

Commodities Strategy Fund  vs.  Putnam Retirement Advantage

Commodities Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commodities Strategy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Commodities Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Putnam Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Commodities Strategy and Putnam Retirement

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

The idea behind Commodities Strategy Fund and Putnam Retirement Advantage 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.