Correlation Between Stifel Financial and Putnam Municipal

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

By analyzing existing cross correlation between Stifel Financial and Putnam Municipal Opportunities, you can compare the effects of market volatilities on Stifel Financial and Putnam Municipal 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 Stifel Financial with a short position of Putnam Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stifel Financial and Putnam Municipal.

Diversification Opportunities for Stifel Financial and Putnam Municipal

-0.45

Correlation Coefficient

Stifel Financial  Putnam Municipal

Very good diversification

The 3 months correlation between Stifel and Putnam is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial and Putnam Municipal Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Municipal Opp and Stifel Financial 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 Stifel Financial are associated (or correlated) with Putnam Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Municipal Opp has no effect on the direction of Stifel Financial i.e., Stifel Financial and Putnam Municipal go up and down completely randomly.

Pair Corralation between Stifel Financial and Putnam Municipal

Allowing for the 90-day total investment horizon Stifel Financial is expected to generate 2.95 times more return on investment than Putnam Municipal. However, Stifel Financial is 2.95 times more volatile than Putnam Municipal Opportunities. It trades about 0.12 of its potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.03 per unit of risk. If you would invest  7,945  in Stifel Financial on September 23, 2024 and sell it today you would earn a total of  2,504  from holding Stifel Financial or generate 31.52% return on investment over 90 days.

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

Stifel Financial  vs.  Putnam Municipal Opportunities

Stifel Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Stifel Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Putnam Municipal Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Municipal Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Putnam Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stifel Financial and Putnam Municipal

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

The idea behind Stifel Financial and Putnam Municipal Opportunities 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.