Correlation Between GM and Putnam American

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

By analyzing existing cross correlation between General Motors and Putnam American Government, you can compare the effects of market volatilities on GM and Putnam American 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 Putnam American. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Putnam American.

Diversification Opportunities for GM and Putnam American

0.0

Correlation Coefficient

GM  Putnam American

Pay attention - limited upside

The 3 months correlation between GM and Putnam is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Putnam American Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam American Gove 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 Putnam American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam American Gove has no effect on the direction of GM i.e., GM and Putnam American go up and down completely randomly.

Pair Corralation between GM and Putnam American

If you would invest  4,423  in General Motors on February 5, 2024 and sell it today you would earn a total of  63.00  from holding General Motors or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

General Motors  vs.  Putnam American Government

General Motors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Putnam American Gove

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam American Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Putnam American 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 Putnam American

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

The idea behind General Motors and Putnam American Government 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..