Correlation Between Steel Dynamics and Putnam Global

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

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

Diversification Opportunities for Steel Dynamics and Putnam Global

0.74

Correlation Coefficient

Steel Dynamics  Putnam Global

Poor diversification

The 3 months correlation between Steel and Putnam is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Putnam Global Incm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Incm and Steel Dynamics 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 Steel Dynamics are associated (or correlated) with Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Incm has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Putnam Global go up and down completely randomly.

Pair Corralation between Steel Dynamics and Putnam Global

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Putnam Global. In addition to that, Steel Dynamics is 8.28 times more volatile than Putnam Global Incm. It trades about -0.04 of its total potential returns per unit of risk. Putnam Global Incm is currently generating about -0.01 per unit of volatility. If you would invest  994.00  in Putnam Global Incm on December 1, 2024 and sell it today you would lose (2.00) from holding Putnam Global Incm or give up 0.2% of portfolio value over 90 days.

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

Steel Dynamics  vs.  Putnam Global Incm

Steel Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Putnam Global Incm

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Steel Dynamics and Putnam Global

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

The idea behind Steel Dynamics and Putnam Global Incm 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.