Correlation Between Putnam Municipal and Tri Continental

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

By analyzing existing cross correlation between Putnam Municipal Opportunities and Tri Continental Closed, you can compare the effects of market volatilities on Putnam Municipal and Tri Continental 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 Municipal with a short position of Tri Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Putnam Municipal and Tri Continental.

Diversification Opportunities for Putnam Municipal and Tri Continental

0.85

Correlation Coefficient

Putnam Municipal  Tri Continental

Very poor diversification

The 3 months correlation between Putnam and Tri is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Putnam Municipal Opportunities and Tri Continental Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental Closed and Putnam Municipal 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 Municipal Opportunities are associated (or correlated) with Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental Closed has no effect on the direction of Putnam Municipal i.e., Putnam Municipal and Tri Continental go up and down completely randomly.

Pair Corralation between Putnam Municipal and Tri Continental

Considering the 90-day investment horizon Putnam Municipal Opportunities is expected to under-perform the Tri Continental. In addition to that, Putnam Municipal is 1.33 times more volatile than Tri Continental Closed. It trades about -0.01 of its total potential returns per unit of risk. Tri Continental Closed is currently generating about 0.04 per unit of volatility. If you would invest  2,629  in Tri Continental Closed on March 28, 2024 and sell it today you would earn a total of  433.00  from holding Tri Continental Closed or generate 16.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Putnam Municipal Opportunities  vs.  Tri Continental Closed

Putnam Municipal Opp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Municipal Opportunities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Putnam Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Tri Continental Closed

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Continental Closed are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tri Continental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Putnam Municipal and Tri Continental

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

The idea behind Putnam Municipal Opportunities and Tri Continental Closed 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.