Correlation Between Guggenheim Taxable and Pioneer Municipal

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

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

Diversification Opportunities for Guggenheim Taxable and Pioneer Municipal

0.7

Correlation Coefficient

Guggenheim Taxable  Pioneer Municipal

Poor diversification

The 3 months correlation between Guggenheim and Pioneer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Taxable Municipal and Pioneer Municipal High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Municipal High and Guggenheim Taxable 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 Guggenheim Taxable Municipal 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 High has no effect on the direction of Guggenheim Taxable i.e., Guggenheim Taxable and Pioneer Municipal go up and down completely randomly.

Pair Corralation between Guggenheim Taxable and Pioneer Municipal

Given the investment horizon of 90 days Guggenheim Taxable Municipal is expected to generate 0.86 times more return on investment than Pioneer Municipal. However, Guggenheim Taxable Municipal is 1.16 times less risky than Pioneer Municipal. It trades about 0.08 of its potential returns per unit of risk. Pioneer Municipal High is currently generating about 0.01 per unit of risk. If you would invest  1,497  in Guggenheim Taxable Municipal on December 30, 2024 and sell it today you would earn a total of  46.00  from holding Guggenheim Taxable Municipal or generate 3.07% return on investment over 90 days.

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

Guggenheim Taxable Municipal  vs.  Pioneer Municipal High

Guggenheim Taxable

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Taxable Municipal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Guggenheim Taxable is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pioneer Municipal High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Municipal High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Pioneer Municipal is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Guggenheim Taxable and Pioneer Municipal

The main advantage of trading using opposite Guggenheim Taxable and Pioneer Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Taxable 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 Guggenheim Taxable Municipal and Pioneer Municipal High 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.