Correlation Between Visa and Putnam Focused

Can any of the company-specific risk be diversified away by investing in both Visa and Putnam Focused 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 Focused 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 Focused Equity, you can compare the effects of market volatilities on Visa and Putnam Focused 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 Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Putnam Focused.

Diversification Opportunities for Visa and Putnam Focused

0.37

Correlation Coefficient

Visa  Putnam Focused

Weak diversification

The 3 months correlation between Visa and Putnam is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Putnam Focused Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Equity 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 Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Equity has no effect on the direction of Visa i.e., Visa and Putnam Focused go up and down completely randomly.

Pair Corralation between Visa and Putnam Focused

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.94 times more return on investment than Putnam Focused. However, Visa Class A is 1.07 times less risky than Putnam Focused. It trades about 0.11 of its potential returns per unit of risk. Putnam Focused Equity is currently generating about 0.0 per unit of risk. If you would invest  28,992  in Visa Class A on September 14, 2024 and sell it today you would earn a total of  2,431  from holding Visa Class A or generate 8.39% return on investment over 90 days.

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

Visa Class A  vs.  Putnam Focused Equity

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Putnam Focused Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Visa and Putnam Focused

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

The idea behind Visa Class A and Putnam Focused Equity 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.