Correlation Between Sarofim Equity and Putnam Tax

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

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

Diversification Opportunities for Sarofim Equity and Putnam Tax

0.52

Correlation Coefficient

Sarofim Equity  Putnam Tax

Very weak diversification

The 3 months correlation between Sarofim and Putnam is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Putnam Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Tax Exempt and Sarofim Equity 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 Sarofim Equity are associated (or correlated) with Putnam Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Tax Exempt has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Putnam Tax go up and down completely randomly.

Pair Corralation between Sarofim Equity and Putnam Tax

Assuming the 90 days horizon Sarofim Equity is expected to under-perform the Putnam Tax. In addition to that, Sarofim Equity is 6.29 times more volatile than Putnam Tax Exempt. It trades about -0.12 of its total potential returns per unit of risk. Putnam Tax Exempt is currently generating about -0.06 per unit of volatility. If you would invest  792.00  in Putnam Tax Exempt on October 8, 2024 and sell it today you would lose (9.00) from holding Putnam Tax Exempt or give up 1.14% of portfolio value over 90 days.

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

Sarofim Equity  vs.  Putnam Tax Exempt

Sarofim Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarofim Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Putnam Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sarofim Equity and Putnam Tax

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

The idea behind Sarofim Equity and Putnam Tax Exempt 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.