Correlation Between Putnam Global and Health Biotchnology

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

By analyzing existing cross correlation between Putnam Global Health and Health Biotchnology Portfolio, you can compare the effects of market volatilities on Putnam Global and Health Biotchnology 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 Health Biotchnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Global and Health Biotchnology.

Diversification Opportunities for Putnam Global and Health Biotchnology

0.96

Correlation Coefficient

Putnam Global  Health Biotchnology

Almost no diversification

The 3 months correlation between Putnam and Health is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Global Health and Health Biotchnology Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Biotchnology 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 Health are associated (or correlated) with Health Biotchnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Biotchnology has no effect on the direction of Putnam Global i.e., Putnam Global and Health Biotchnology go up and down completely randomly.

Pair Corralation between Putnam Global and Health Biotchnology

Assuming the 90 days horizon Putnam Global Health is expected to generate 0.95 times more return on investment than Health Biotchnology. However, Putnam Global Health is 1.05 times less risky than Health Biotchnology. It trades about 0.1 of its potential returns per unit of risk. Health Biotchnology Portfolio is currently generating about 0.07 per unit of risk. If you would invest  5,267  in Putnam Global Health on June 23, 2024 and sell it today you would earn a total of  2,328  from holding Putnam Global Health or generate 44.2% return on investment over 90 days.

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

Putnam Global Health  vs.  Health Biotchnology Portfolio

Putnam Global Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Global Health are ranked lower than 10 (%) 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.

Health Biotchnology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Health Biotchnology Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Health Biotchnology 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 Global and Health Biotchnology

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

The idea behind Putnam Global Health and Health Biotchnology Portfolio 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.