Correlation Between Putnam Small and HUMANA

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

By analyzing existing cross correlation between Putnam Small Cap and HUMANA INC, you can compare the effects of market volatilities on Putnam Small and HUMANA 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 Small with a short position of HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Small and HUMANA.

Diversification Opportunities for Putnam Small and HUMANA

-0.03

Correlation Coefficient

Putnam Small  HUMANA

Good diversification

The 3 months correlation between Putnam and HUMANA is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Small Cap and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC and Putnam Small 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 Small Cap are associated (or correlated) with HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Putnam Small i.e., Putnam Small and HUMANA go up and down completely randomly.

Pair Corralation between Putnam Small and HUMANA

Assuming the 90 days horizon Putnam Small Cap is expected to under-perform the HUMANA. In addition to that, Putnam Small is 1.12 times more volatile than HUMANA INC. It trades about -0.01 of its total potential returns per unit of risk. HUMANA INC is currently generating about 0.09 per unit of volatility. If you would invest  8,000  in HUMANA INC on March 12, 2024 and sell it today you would earn a total of  412.00  from holding HUMANA INC or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Putnam Small Cap  vs.  HUMANA INC

Putnam Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Putnam Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Putnam Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUMANA INC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HUMANA INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HUMANA 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 Small and HUMANA

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

The idea behind Putnam Small Cap and HUMANA INC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.