Correlation Between GM and Putman Absolute

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

By analyzing existing cross correlation between General Motors and Putman Absolute Return, you can compare the effects of market volatilities on GM and Putman Absolute 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 GM with a short position of Putman Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Putman Absolute.

Diversification Opportunities for GM and Putman Absolute

0.26

Correlation Coefficient

GM  Putman Absolute

Modest diversification

The 3 months correlation between GM and Putman is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Putman Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putman Absolute Return and GM 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 General Motors are associated (or correlated) with Putman Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putman Absolute Return has no effect on the direction of GM i.e., GM and Putman Absolute go up and down completely randomly.

Pair Corralation between GM and Putman Absolute

Allowing for the 90-day total investment horizon General Motors is expected to generate 7.57 times more return on investment than Putman Absolute. However, GM is 7.57 times more volatile than Putman Absolute Return. It trades about 0.12 of its potential returns per unit of risk. Putman Absolute Return is currently generating about 0.1 per unit of risk. If you would invest  4,532  in General Motors on May 6, 2025 and sell it today you would earn a total of  770.50  from holding General Motors or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

General Motors  vs.  Putman Absolute Return

General Motors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Putman Absolute Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putman Absolute Return are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putman Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Putman Absolute

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

The idea behind General Motors and Putman Absolute Return 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.