Correlation Between Energy Basic and Putnam Convertible

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

By analyzing existing cross correlation between Energy Basic Materials and Putnam Convertible Incm Gwth, you can compare the effects of market volatilities on Energy Basic and Putnam Convertible 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 Energy Basic with a short position of Putnam Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Putnam Convertible.

Diversification Opportunities for Energy Basic and Putnam Convertible

0.19

Correlation Coefficient

Energy Basic  Putnam Convertible

Average diversification

The 3 months correlation between Energy and Putnam is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Putnam Convertible Incm Gwth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Convertible Incm and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Putnam Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Convertible Incm has no effect on the direction of Energy Basic i.e., Energy Basic and Putnam Convertible go up and down completely randomly.

Pair Corralation between Energy Basic and Putnam Convertible

Assuming the 90 days horizon Energy Basic Materials is expected to under-perform the Putnam Convertible. In addition to that, Energy Basic is 1.81 times more volatile than Putnam Convertible Incm Gwth. It trades about -0.01 of its total potential returns per unit of risk. Putnam Convertible Incm Gwth is currently generating about 0.23 per unit of volatility. If you would invest  2,415  in Putnam Convertible Incm Gwth on September 14, 2024 and sell it today you would earn a total of  178.00  from holding Putnam Convertible Incm Gwth or generate 7.37% return on investment over 90 days.

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

Energy Basic Materials  vs.  Putnam Convertible Incm Gwth

Energy Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Convertible Incm

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Incm Gwth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Putnam Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Energy Basic and Putnam Convertible

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

The idea behind Energy Basic Materials and Putnam Convertible Incm Gwth 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.