Correlation Between Pioneer Municipal and New America

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

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

Diversification Opportunities for Pioneer Municipal and New America

0.42

Correlation Coefficient

Pioneer Municipal  New America

Very weak diversification

The 3 months correlation between Pioneer and New is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Municipal High and New America High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New America High and Pioneer Municipal 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 Pioneer Municipal High are associated (or correlated) with New America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New America High has no effect on the direction of Pioneer Municipal i.e., Pioneer Municipal and New America go up and down completely randomly.

Pair Corralation between Pioneer Municipal and New America

Considering the 90-day investment horizon Pioneer Municipal High is expected to under-perform the New America. In addition to that, Pioneer Municipal is 1.81 times more volatile than New America High. It trades about -0.01 of its total potential returns per unit of risk. New America High is currently generating about 0.05 per unit of volatility. If you would invest  817.00  in New America High on November 20, 2024 and sell it today you would earn a total of  3.00  from holding New America High or generate 0.37% return on investment over 90 days.

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

Pioneer Municipal High  vs.  New America High

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.

New America High

Risk-Adjusted Performance

Weak

Over the last 90 days New America High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, New America is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pioneer Municipal and New America

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

The idea behind Pioneer Municipal High and New America 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.