Correlation Between Putnam Convertible and Financials Ultrasector

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

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

Diversification Opportunities for Putnam Convertible and Financials Ultrasector

0.92

Correlation Coefficient

Putnam Convertible  Financials Ultrasector

Almost no diversification

The 3 months correlation between Putnam and Financials is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Securities and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector and Putnam Convertible 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 Convertible Securities are associated (or correlated) with Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Financials Ultrasector go up and down completely randomly.

Pair Corralation between Putnam Convertible and Financials Ultrasector

Assuming the 90 days horizon Putnam Convertible Securities is expected to generate 0.42 times more return on investment than Financials Ultrasector. However, Putnam Convertible Securities is 2.37 times less risky than Financials Ultrasector. It trades about 0.17 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.07 per unit of risk. If you would invest  2,538  in Putnam Convertible Securities on May 5, 2025 and sell it today you would earn a total of  149.00  from holding Putnam Convertible Securities or generate 5.87% return on investment over 90 days.

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

Putnam Convertible Securities  vs.  Financials Ultrasector Profund

Putnam Convertible

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Convertible Securities are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financials Ultrasector

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financials Ultrasector Profund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Financials Ultrasector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnam Convertible and Financials Ultrasector

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

The idea behind Putnam Convertible Securities and Financials Ultrasector Profund 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.