Correlation Between Visa and Putnam Growth

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

By analyzing existing cross correlation between Visa Class A and Putnam Growth Opportunities, you can compare the effects of market volatilities on Visa and Putnam Growth 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 Visa with a short position of Putnam Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Putnam Growth.

Diversification Opportunities for Visa and Putnam Growth

0.65

Correlation Coefficient

Visa  Putnam Growth

Poor diversification

The 3 months correlation between Visa and Putnam is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Putnam Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Growth Opport and Visa 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 Visa Class A are associated (or correlated) with Putnam Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Growth Opport has no effect on the direction of Visa i.e., Visa and Putnam Growth go up and down completely randomly.

Pair Corralation between Visa and Putnam Growth

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.04 times more return on investment than Putnam Growth. However, Visa is 1.04 times more volatile than Putnam Growth Opportunities. It trades about 0.2 of its potential returns per unit of risk. Putnam Growth Opportunities is currently generating about 0.12 per unit of risk. If you would invest  27,443  in Visa Class A on October 8, 2024 and sell it today you would earn a total of  3,861  from holding Visa Class A or generate 14.07% return on investment over 90 days.

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

Visa Class A  vs.  Putnam Growth Opportunities

Visa Class A

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Putnam Growth Opport

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Growth Opportunities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Putnam Growth

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

The idea behind Visa Class A and Putnam Growth Opportunities 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.