Correlation Between Stone Harbor and Pimco Municipal

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

By analyzing existing cross correlation between Stone Harbor Emerging and Pimco Municipal Income, you can compare the effects of market volatilities on Stone Harbor and Pimco 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 Stone Harbor with a short position of Pimco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Harbor and Pimco Municipal.

Diversification Opportunities for Stone Harbor and Pimco Municipal

0.68

Correlation Coefficient

Stone Harbor  Pimco Municipal

Poor diversification

The 3 months correlation between Stone and Pimco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stone Harbor Emerging and Pimco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Municipal Income and Stone Harbor 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 Stone Harbor Emerging are associated (or correlated) with Pimco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Municipal Income has no effect on the direction of Stone Harbor i.e., Stone Harbor and Pimco Municipal go up and down completely randomly.

Pair Corralation between Stone Harbor and Pimco Municipal

Considering the 90-day investment horizon Stone Harbor Emerging is expected to generate 1.76 times more return on investment than Pimco Municipal. However, Stone Harbor is 1.76 times more volatile than Pimco Municipal Income. It trades about -0.13 of its potential returns per unit of risk. Pimco Municipal Income is currently generating about -0.36 per unit of risk. If you would invest  506.00  in Stone Harbor Emerging on October 7, 2024 and sell it today you would lose (18.00) from holding Stone Harbor Emerging or give up 3.56% of portfolio value over 90 days.

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

Stone Harbor Emerging  vs.  Pimco Municipal Income

Stone Harbor Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Harbor Emerging has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Stone Harbor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pimco Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pimco Municipal Income has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the fund institutional investors.

Pair Trading with Stone Harbor and Pimco Municipal

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

The idea behind Stone Harbor Emerging and Pimco Municipal Income 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.