Correlation Between Putnam Global and Vanguard Total

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

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

Diversification Opportunities for Putnam Global and Vanguard Total

0.79

Correlation Coefficient

Putnam Global  Vanguard Total

Poor diversification

The 3 months correlation between Putnam and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Equity and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter and Putnam Global 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 Putnam Global Equity are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of Putnam Global i.e., Putnam Global and Vanguard Total go up and down completely randomly.

Pair Corralation between Putnam Global and Vanguard Total

Assuming the 90 days horizon Putnam Global is expected to generate 4.36 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Putnam Global Equity is 1.06 times less risky than Vanguard Total. It trades about 0.0 of its potential returns per unit of risk. Vanguard Total International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,933  in Vanguard Total International on February 3, 2024 and sell it today you would earn a total of  4.00  from holding Vanguard Total International or generate 0.21% return on investment over 90 days.

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

Putnam Global Equity  vs.  Vanguard Total International

Putnam Global Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Total Inter

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Putnam Global and Vanguard Total

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

The idea behind Putnam Global Equity and Vanguard Total International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.