Correlation Between Templeton Dragon and Putnam High

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

By analyzing existing cross correlation between Templeton Dragon Closed and Putnam High Income, you can compare the effects of market volatilities on Templeton Dragon and Putnam High 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 Templeton Dragon with a short position of Putnam High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Dragon and Putnam High.

Diversification Opportunities for Templeton Dragon and Putnam High

0.69

Correlation Coefficient

Templeton Dragon  Putnam High

Poor diversification

The 3 months correlation between Templeton and Putnam is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Dragon Closed and Putnam High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam High Income and Templeton Dragon 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 Templeton Dragon Closed are associated (or correlated) with Putnam High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam High Income has no effect on the direction of Templeton Dragon i.e., Templeton Dragon and Putnam High go up and down completely randomly.

Pair Corralation between Templeton Dragon and Putnam High

Considering the 90-day investment horizon Templeton Dragon Closed is expected to generate 2.45 times more return on investment than Putnam High. However, Templeton Dragon is 2.45 times more volatile than Putnam High Income. It trades about 0.18 of its potential returns per unit of risk. Putnam High Income is currently generating about 0.13 per unit of risk. If you would invest  841.00  in Templeton Dragon Closed on December 29, 2024 and sell it today you would earn a total of  138.00  from holding Templeton Dragon Closed or generate 16.41% return on investment over 90 days.

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

Templeton Dragon Closed  vs.  Putnam High Income

Templeton Dragon Closed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Dragon Closed are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly inconsistent fundamental indicators, Templeton Dragon reported solid returns over the last few months and may actually be approaching a breakup point.

Putnam High Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam High Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable fundamental indicators, Putnam High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Templeton Dragon and Putnam High

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

The idea behind Templeton Dragon Closed and Putnam High Income 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.