Correlation Between Qs Moderate and Putnam Multi-cap

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

By analyzing existing cross correlation between Qs Moderate Growth and Putnam Multi Cap Growth, you can compare the effects of market volatilities on Qs Moderate and Putnam Multi-cap 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 Qs Moderate with a short position of Putnam Multi-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qs Moderate and Putnam Multi-cap.

Diversification Opportunities for Qs Moderate and Putnam Multi-cap

0.83

Correlation Coefficient

Qs Moderate  Putnam Multi-cap

Very poor diversification

The 3 months correlation between SCGCX and Putnam is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Qs Moderate Growth and Putnam Multi Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Multi Cap and Qs Moderate 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 Qs Moderate Growth are associated (or correlated) with Putnam Multi-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Multi Cap has no effect on the direction of Qs Moderate i.e., Qs Moderate and Putnam Multi-cap go up and down completely randomly.

Pair Corralation between Qs Moderate and Putnam Multi-cap

Assuming the 90 days horizon Qs Moderate is expected to generate 2.32 times less return on investment than Putnam Multi-cap. But when comparing it to its historical volatility, Qs Moderate Growth is 1.27 times less risky than Putnam Multi-cap. It trades about 0.05 of its potential returns per unit of risk. Putnam Multi Cap Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,763  in Putnam Multi Cap Growth on October 10, 2024 and sell it today you would earn a total of  3,750  from holding Putnam Multi Cap Growth or generate 48.31% return on investment over 90 days.

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

Qs Moderate Growth  vs.  Putnam Multi Cap Growth

Qs Moderate Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Multi Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Qs Moderate and Putnam Multi-cap

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

The idea behind Qs Moderate Growth and Putnam Multi Cap Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.