Correlation Between Tax-managed International and Putnam Global
Can any of the company-specific risk be diversified away by investing in both Tax-managed International and Putnam Global 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 Tax-managed International and Putnam Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed International Equity and Putnam Global Financials, you can compare the effects of market volatilities on Tax-managed International and Putnam Global 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 Tax-managed International with a short position of Putnam Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed International and Putnam Global.
Diversification Opportunities for Tax-managed International and Putnam Global
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax-managed and Putnam is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed International Equi and Putnam Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Global Financials and Tax-managed International 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 Tax Managed International Equity are associated (or correlated) with Putnam Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Global Financials has no effect on the direction of Tax-managed International i.e., Tax-managed International and Putnam Global go up and down completely randomly.
Pair Corralation between Tax-managed International and Putnam Global
Assuming the 90 days horizon Tax Managed International Equity is expected to generate 1.5 times more return on investment than Putnam Global. However, Tax-managed International is 1.5 times more volatile than Putnam Global Financials. It trades about 0.29 of its potential returns per unit of risk. Putnam Global Financials is currently generating about 0.25 per unit of risk. If you would invest 1,212 in Tax Managed International Equity on April 24, 2025 and sell it today you would earn a total of 127.00 from holding Tax Managed International Equity or generate 10.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Managed International Equi vs. Putnam Global Financials
Performance |
| Timeline |
| Tax-managed International |
| Putnam Global Financials |
Tax-managed International and Putnam Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed International and Putnam Global
The main advantage of trading using opposite Tax-managed International and Putnam Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed International position performs unexpectedly, Putnam Global 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 Putnam Global will offset losses from the drop in Putnam Global's long position.The idea behind Tax Managed International Equity and Putnam Global Financials 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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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 the Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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