Correlation Between VHAI and Putnam Global

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

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

Diversification Opportunities for VHAI and Putnam Global

-0.62

Correlation Coefficient

VHAI  Putnam Global

Excellent diversification

The 3 months correlation between VHAI and Putnam is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Putnam Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Technology and VHAI 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 VHAI 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 Technology has no effect on the direction of VHAI i.e., VHAI and Putnam Global go up and down completely randomly.

Pair Corralation between VHAI and Putnam Global

Given the investment horizon of 90 days VHAI is expected to under-perform the Putnam Global. In addition to that, VHAI is 10.1 times more volatile than Putnam Global Technology. It trades about -0.17 of its total potential returns per unit of risk. Putnam Global Technology is currently generating about 0.12 per unit of volatility. If you would invest  3,273  in Putnam Global Technology on September 22, 2024 and sell it today you would earn a total of  3,095  from holding Putnam Global Technology or generate 94.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	39.03%
Values	Daily Returns

VHAI  vs.  Putnam Global Technology

VHAI

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating basic indicators, VHAI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Putnam Global Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Technology are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 VHAI and Putnam Global

The main advantage of trading using opposite VHAI and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VHAI 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 VHAI and Putnam Global Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.