Correlation Between Western Asset and Pioneer Floating

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

By analyzing existing cross correlation between Western Asset High and Pioneer Floating Rate, you can compare the effects of market volatilities on Western Asset and Pioneer Floating 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 Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Pioneer Floating.

Diversification Opportunities for Western Asset and Pioneer Floating

0.45

Correlation Coefficient

Western Asset  Pioneer Floating

Very weak diversification

The 3 months correlation between Western and Pioneer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Pioneer Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Floating Rate 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 High are associated (or correlated) with Pioneer Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Floating Rate has no effect on the direction of Western Asset i.e., Western Asset and Pioneer Floating go up and down completely randomly.

Pair Corralation between Western Asset and Pioneer Floating

Considering the 90-day investment horizon Western Asset High is expected to generate 1.28 times more return on investment than Pioneer Floating. However, Western Asset is 1.28 times more volatile than Pioneer Floating Rate. It trades about 0.13 of its potential returns per unit of risk. Pioneer Floating Rate is currently generating about -0.03 per unit of risk. If you would invest  1,145  in Western Asset High on December 29, 2024 and sell it today you would earn a total of  40.00  from holding Western Asset High or generate 3.49% return on investment over 90 days.

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

Western Asset High  vs.  Pioneer Floating Rate

Western Asset High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pioneer Floating Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Floating Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Pioneer Floating is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Asset and Pioneer Floating

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

The idea behind Western Asset High and Pioneer Floating Rate 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.