Correlation Between MFS Municipal and Pioneer Municipal

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

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

Diversification Opportunities for MFS Municipal and Pioneer Municipal

0.64

Correlation Coefficient

MFS Municipal  Pioneer Municipal

Poor diversification

The 3 months correlation between MFS and Pioneer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MFS Municipal Income 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 MFS 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 MFS Municipal Income 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 MFS Municipal i.e., MFS Municipal and Pioneer Municipal go up and down completely randomly.

Pair Corralation between MFS Municipal and Pioneer Municipal

Considering the 90-day investment horizon MFS Municipal is expected to generate 1.13 times less return on investment than Pioneer Municipal. But when comparing it to its historical volatility, MFS Municipal Income is 1.01 times less risky than Pioneer Municipal. It trades about 0.04 of its potential returns per unit of risk. Pioneer Municipal High is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  920.00  in Pioneer Municipal High on December 27, 2024 and sell it today you would earn a total of  16.00  from holding Pioneer Municipal High or generate 1.74% return on investment over 90 days.

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

MFS Municipal Income  vs.  Pioneer Municipal High

MFS Municipal Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Municipal Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pioneer Municipal High

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Municipal High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 MFS Municipal and Pioneer Municipal

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