Correlation Between Sierra E and Pioneer E

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

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

Diversification Opportunities for Sierra E and Pioneer E

0.46

Correlation Coefficient

Sierra E  Pioneer E

Very weak diversification

The 3 months correlation between Sierra and Pioneer is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Pioneer E Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer E Equity and Sierra E 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 Sierra E Retirement are associated (or correlated) with Pioneer E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer E Equity has no effect on the direction of Sierra E i.e., Sierra E and Pioneer E go up and down completely randomly.

Pair Corralation between Sierra E and Pioneer E

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Pioneer E. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 2.24 times less risky than Pioneer E. The mutual fund trades about -0.35 of its potential returns per unit of risk. The Pioneer E Equity is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,375  in Pioneer E Equity on September 24, 2024 and sell it today you would lose (42.00) from holding Pioneer E Equity or give up 1.77% of portfolio value over 90 days.

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

Sierra E Retirement  vs.  Pioneer E Equity

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pioneer E Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer E Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pioneer E is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra E and Pioneer E

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

The idea behind Sierra E Retirement and Pioneer E Equity 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.