Correlation Between Putnam Short and Short Term

Can any of the company-specific risk be diversified away by investing in both Putnam Short and Short Term 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 Short Term 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 Short Term Fund Institutional, you can compare the effects of market volatilities on Putnam Short and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Short and Short Term.

Diversification Opportunities for Putnam Short and Short Term

0.96

Correlation Coefficient

Putnam Short  Short Term

Almost no diversification

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

Pair Corralation between Putnam Short and Short Term

Assuming the 90 days horizon Putnam Short is expected to generate 1.13 times less return on investment than Short Term. But when comparing it to its historical volatility, Putnam Short Duration is 1.24 times less risky than Short Term. It trades about 0.22 of its potential returns per unit of risk. Short Term Fund Institutional is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  950.00  in Short Term Fund Institutional on February 18, 2024 and sell it today you would earn a total of  14.00  from holding Short Term Fund Institutional or generate 1.47% return on investment over 90 days.

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

Putnam Short Duration  vs.  Short Term Fund Institutional

Putnam Short Duration

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Short Duration are ranked lower than 16 (%) 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.

Short Term Fund

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund Institutional are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Short Term 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 Short and Short Term

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

The idea behind Putnam Short Duration and Short Term Fund Institutional 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.