Correlation Between Putnam Focused and IndexIQ

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Can any of the company-specific risk be diversified away by investing in both Putnam Focused and IndexIQ 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 Focused and IndexIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Putnam Focused Large and IndexIQ, you can compare the effects of market volatilities on Putnam Focused and IndexIQ 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 Focused with a short position of IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Focused and IndexIQ.

Diversification Opportunities for Putnam Focused and IndexIQ

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Putnam and IndexIQ is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Focused Large and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and Putnam Focused 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 Focused Large are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Putnam Focused i.e., Putnam Focused and IndexIQ go up and down completely randomly.

Pair Corralation between Putnam Focused and IndexIQ

If you would invest  3,438  in Putnam Focused Large on January 14, 2024 and sell it today you would earn a total of  42.00  from holding Putnam Focused Large or generate 1.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Putnam Focused Large  vs.  IndexIQ

 Performance 
       Timeline  
Putnam Focused Large 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Putnam Focused may actually be approaching a critical reversion point that can send shares even higher in May 2024.
IndexIQ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Putnam Focused and IndexIQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Putnam Focused and IndexIQ

The main advantage of trading using opposite Putnam Focused and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Focused position performs unexpectedly, IndexIQ 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 IndexIQ will offset losses from the drop in IndexIQ's long position.
The idea behind Putnam Focused Large and IndexIQ 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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