Correlation Between Short Precious and Putnam Convertible

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

By analyzing existing cross correlation between Short Precious Metals and Putnam Vertible Securities, you can compare the effects of market volatilities on Short Precious 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 Short Precious with a short position of Putnam Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Precious and Putnam Convertible.

Diversification Opportunities for Short Precious and Putnam Convertible

0.36

Correlation Coefficient

Short Precious  Putnam Convertible

Weak diversification

The 3 months correlation between Short and Putnam is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Short Precious Metals and Putnam Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Vertible Secu and Short Precious 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 Short Precious Metals 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 Vertible Secu has no effect on the direction of Short Precious i.e., Short Precious and Putnam Convertible go up and down completely randomly.

Pair Corralation between Short Precious and Putnam Convertible

Assuming the 90 days horizon Short Precious Metals is expected to generate 3.01 times more return on investment than Putnam Convertible. However, Short Precious is 3.01 times more volatile than Putnam Vertible Securities. It trades about 0.08 of its potential returns per unit of risk. Putnam Vertible Securities is currently generating about 0.12 per unit of risk. If you would invest  873.00  in Short Precious Metals on October 25, 2024 and sell it today you would earn a total of  72.00  from holding Short Precious Metals or generate 8.25% return on investment over 90 days.

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

Short Precious Metals  vs.  Putnam Vertible Securities

Short Precious Metals

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Short Precious Metals are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Short Precious may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Putnam Vertible Secu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Vertible Securities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Precious and Putnam Convertible

The main advantage of trading using opposite Short Precious and Putnam Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Precious 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 Short Precious Metals and Putnam Vertible Securities 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.