Correlation Between HYB and Pioneer Municipal

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

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

Diversification Opportunities for HYB and Pioneer Municipal

0.12

Correlation Coefficient

HYB  Pioneer Municipal

Average diversification

The 3 months correlation between HYB and Pioneer is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding HYB 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 HYB 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 HYB 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 HYB i.e., HYB and Pioneer Municipal go up and down completely randomly.

Pair Corralation between HYB and Pioneer Municipal

Considering the 90-day investment horizon HYB is expected to generate 0.53 times more return on investment than Pioneer Municipal. However, HYB is 1.9 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  812.00  in HYB on December 27, 2024 and sell it today you would earn a total of  8.00  from holding HYB or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.33%
Values	Daily Returns

HYB  vs.  Pioneer Municipal High

HYB

Risk-Adjusted Performance

Modest

Over the last 90 days HYB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HYB is not utilizing all of its potentials. The latest 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. In spite of fairly stable basic indicators, Pioneer Municipal is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with HYB and Pioneer Municipal

The main advantage of trading using opposite HYB and Pioneer Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYB 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 HYB 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.