Correlation Between Aig Government and Putnam Multi-cap

Can any of the company-specific risk be diversified away by investing in both Aig Government 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 Aig Government 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 Aig Government Money and Putnam Multi Cap Growth, you can compare the effects of market volatilities on Aig Government 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 Aig Government with a short position of Putnam Multi-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aig Government and Putnam Multi-cap.

Diversification Opportunities for Aig Government and Putnam Multi-cap

-0.36

Correlation Coefficient

Aig Government  Putnam Multi-cap

Very good diversification

The 3 months correlation between Aig and Putnam is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money 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 Aig Government 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 Aig Government Money 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 Aig Government i.e., Aig Government and Putnam Multi-cap go up and down completely randomly.

Pair Corralation between Aig Government and Putnam Multi-cap

Assuming the 90 days horizon Aig Government is expected to generate 635.0 times less return on investment than Putnam Multi-cap. But when comparing it to its historical volatility, Aig Government Money is 3.66 times less risky than Putnam Multi-cap. It trades about 0.0 of its potential returns per unit of risk. Putnam Multi Cap Growth is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,886  in Putnam Multi Cap Growth on September 4, 2024 and sell it today you would earn a total of  1,068  from holding Putnam Multi Cap Growth or generate 8.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aig Government Money  vs.  Putnam Multi Cap Growth

Aig Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aig Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aig Government 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

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Multi Cap Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Multi-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aig Government and Putnam Multi-cap

The main advantage of trading using opposite Aig Government and Putnam Multi-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aig Government 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 Aig Government Money 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.