Correlation Between Vanguard Russell and Putnam Sustainable

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

By analyzing existing cross correlation between Vanguard Russell 1000 and Putnam Sustainable Leaders, you can compare the effects of market volatilities on Vanguard Russell and Putnam Sustainable 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 Vanguard Russell with a short position of Putnam Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Putnam Sustainable.

Diversification Opportunities for Vanguard Russell and Putnam Sustainable

0.55

Correlation Coefficient

Vanguard Russell  Putnam Sustainable

Very weak diversification

The 3 months correlation between Vanguard and Putnam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 and Putnam Sustainable Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Sustainable and Vanguard Russell 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 Vanguard Russell 1000 are associated (or correlated) with Putnam Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Sustainable has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and Putnam Sustainable go up and down completely randomly.

Pair Corralation between Vanguard Russell and Putnam Sustainable

Given the investment horizon of 90 days Vanguard Russell 1000 is expected to generate 1.35 times more return on investment than Putnam Sustainable. However, Vanguard Russell is 1.35 times more volatile than Putnam Sustainable Leaders. It trades about -0.02 of its potential returns per unit of risk. Putnam Sustainable Leaders is currently generating about -0.08 per unit of risk. If you would invest  10,329  in Vanguard Russell 1000 on December 1, 2024 and sell it today you would lose (181.00) from holding Vanguard Russell 1000 or give up 1.75% of portfolio value over 90 days.

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

Vanguard Russell 1000  vs.  Putnam Sustainable Leaders

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vanguard Russell is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Putnam Sustainable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Putnam Sustainable Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Putnam Sustainable is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Russell and Putnam Sustainable

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

The idea behind Vanguard Russell 1000 and Putnam Sustainable Leaders 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.