Correlation Between California Municipal and Putnam Focused

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

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

Diversification Opportunities for California Municipal and Putnam Focused

0.35

Correlation Coefficient

California Municipal  Putnam Focused

Weak diversification

The 3 months correlation between California and Putnam is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Putnam Focused Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Equity and California Municipal 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 California Municipal Portfolio are associated (or correlated) with Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Equity has no effect on the direction of California Municipal i.e., California Municipal and Putnam Focused go up and down completely randomly.

Pair Corralation between California Municipal and Putnam Focused

Assuming the 90 days horizon California Municipal Portfolio is expected to under-perform the Putnam Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, California Municipal Portfolio is 6.56 times less risky than Putnam Focused. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Putnam Focused Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,619  in Putnam Focused Equity on October 27, 2024 and sell it today you would earn a total of  55.00  from holding Putnam Focused Equity or generate 1.52% return on investment over 90 days.

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

California Municipal Portfolio  vs.  Putnam Focused Equity

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Putnam Focused Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with California Municipal and Putnam Focused

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

The idea behind California Municipal Portfolio and Putnam Focused Equity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.