Correlation Between Western Asset and Pioneer Municipal

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

By analyzing existing cross correlation between Western Asset Mortgage and Pioneer Municipal Highome, you can compare the effects of market volatilities on Western Asset and Pioneer Municipal 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 Western Asset with a short position of Pioneer Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Pioneer Municipal.

Diversification Opportunities for Western Asset and Pioneer Municipal

0.61

Correlation Coefficient

Western Asset  Pioneer Municipal

Poor diversification

The 3 months correlation between Western and Pioneer is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Pioneer Municipal Highome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Municipal Highome and Western Asset 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 Western Asset Mortgage are associated (or correlated) with Pioneer Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Municipal Highome has no effect on the direction of Western Asset i.e., Western Asset and Pioneer Municipal go up and down completely randomly.

Pair Corralation between Western Asset and Pioneer Municipal

Considering the 90-day investment horizon Western Asset Mortgage is expected to generate 0.64 times more return on investment than Pioneer Municipal. However, Western Asset Mortgage is 1.56 times less risky than Pioneer Municipal. It trades about 0.1 of its potential returns per unit of risk. Pioneer Municipal Highome is currently generating about 0.02 per unit of risk. If you would invest  1,146  in Western Asset Mortgage on December 29, 2024 and sell it today you would earn a total of  33.00  from holding Western Asset Mortgage or generate 2.88% return on investment over 90 days.

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

Western Asset Mortgage  vs.  Pioneer Municipal Highome

Western Asset Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pioneer Municipal Highome

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Municipal Highome are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pioneer Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Pioneer Municipal

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

The idea behind Western Asset Mortgage and Pioneer Municipal Highome 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.