Correlation Between Putnam Short and Chevron Corp

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

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

Diversification Opportunities for Putnam Short and Chevron Corp

0.84

Correlation Coefficient

Putnam Short  Chevron Corp

Very poor diversification

The 3 months correlation between Putnam and Chevron is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Short Duration and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Putnam Short 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 Short Duration are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Putnam Short i.e., Putnam Short and Chevron Corp go up and down completely randomly.

Pair Corralation between Putnam Short and Chevron Corp

Assuming the 90 days horizon Putnam Short is expected to generate 2.62 times less return on investment than Chevron Corp. But when comparing it to its historical volatility, Putnam Short Duration is 15.41 times less risky than Chevron Corp. It trades about 0.21 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,314  in Chevron Corp on January 19, 2024 and sell it today you would earn a total of  2,443  from holding Chevron Corp or generate 18.35% return on investment over 90 days.

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

Putnam Short Duration  vs.  Chevron Corp

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.

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Putnam Short and Chevron Corp

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

The idea behind Putnam Short Duration and Chevron Corp 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..