Correlation Between Alphabet and Putnam Short

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

By analyzing existing cross correlation between Alphabet Inc Class C and Putnam Short Duration, you can compare the effects of market volatilities on Alphabet and Putnam Short 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 Alphabet with a short position of Putnam Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Putnam Short.

Diversification Opportunities for Alphabet and Putnam Short

0.32

Correlation Coefficient

Alphabet  Putnam Short

Weak diversification

The 3 months correlation between Alphabet and Putnam is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Putnam Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Short Duration and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Putnam Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Short Duration has no effect on the direction of Alphabet i.e., Alphabet and Putnam Short go up and down completely randomly.

Pair Corralation between Alphabet and Putnam Short

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 16.38 times more return on investment than Putnam Short. However, Alphabet is 16.38 times more volatile than Putnam Short Duration. It trades about 0.08 of its potential returns per unit of risk. Putnam Short Duration is currently generating about 0.23 per unit of risk. If you would invest  13,179  in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of  2,813  from holding Alphabet Inc Class C or generate 21.34% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Putnam Short Duration

Alphabet Class C

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Putnam Short Duration

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Short Duration are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Putnam Short

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

The idea behind Alphabet Inc Class C and Putnam Short Duration 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 Global Correlations module to find global opportunities by holding instruments from different markets.