Correlation Between Miller Convertible and Miller Intermediate

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

By analyzing existing cross correlation between Miller Vertible Bond and Miller Intermediate Bond, you can compare the effects of market volatilities on Miller Convertible and Miller Intermediate 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 Miller Convertible with a short position of Miller Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Convertible and Miller Intermediate.

Diversification Opportunities for Miller Convertible and Miller Intermediate

0.86

Correlation Coefficient

Miller Convertible  Miller Intermediate

Very poor diversification

The 3 months correlation between Miller and Miller is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Miller Vertible Bond and Miller Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Intermediate Bond and Miller Convertible 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 Miller Vertible Bond are associated (or correlated) with Miller Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Intermediate Bond has no effect on the direction of Miller Convertible i.e., Miller Convertible and Miller Intermediate go up and down completely randomly.

Pair Corralation between Miller Convertible and Miller Intermediate

Assuming the 90 days horizon Miller Vertible Bond is expected to under-perform the Miller Intermediate. In addition to that, Miller Convertible is 1.35 times more volatile than Miller Intermediate Bond. It trades about -0.28 of its total potential returns per unit of risk. Miller Intermediate Bond is currently generating about -0.25 per unit of volatility. If you would invest  1,665  in Miller Intermediate Bond on October 9, 2024 and sell it today you would lose (23.00) from holding Miller Intermediate Bond or give up 1.38% of portfolio value over 90 days.

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

Miller Vertible Bond  vs.  Miller Intermediate Bond

Miller Vertible Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Miller Intermediate Bond

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Intermediate Bond are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Miller Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Miller Convertible and Miller Intermediate

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

The idea behind Miller Vertible Bond and Miller Intermediate Bond 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.