Correlation Between Putnam Convertible and Federated Mdt

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

Diversification Opportunities for Putnam Convertible and Federated Mdt

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Putnam and Federated is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Convertible Securities and Federated Mdt Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Balanced and Putnam Convertible 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 Convertible Securities are associated (or correlated) with Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Balanced has no effect on the direction of Putnam Convertible i.e., Putnam Convertible and Federated Mdt go up and down completely randomly.

Pair Corralation between Putnam Convertible and Federated Mdt

If you would invest  1,850  in Federated Mdt Balanced on August 29, 2022 and sell it today you would earn a total of  93.00  from holding Federated Mdt Balanced or generate 5.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy0.2%
ValuesDaily Returns

Putnam Convertible Securities  vs.  Federated Mdt Balanced

 Performance (%) 
       Timeline  
Putnam Convertible 
Putnam Performance
0 of 100
Over the last 90 days Putnam Convertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Putnam Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Federated Mdt Balanced 
Federated Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Federated Mdt Balanced are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Mdt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Price Channel

Putnam Convertible and Federated Mdt Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Putnam Convertible and Federated Mdt

The main advantage of trading using opposite Putnam Convertible and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Putnam Convertible position performs unexpectedly, Federated Mdt 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 Federated Mdt will offset losses from the drop in Federated Mdt's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Putnam Convertible as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Putnam Convertible's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Putnam Convertible's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Putnam Convertible Securities.
The idea behind Putnam Convertible Securities and Federated Mdt Balanced 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.
Federated Mdt vs. American Balanced
Check out your portfolio center. 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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