Correlation Between Miller Convertible and Miller Market

Can any of the company-specific risk be diversified away by investing in both Miller Convertible and Miller Market 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 Market 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 Market Neutral, you can compare the effects of market volatilities on Miller Convertible and Miller Market 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 Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Convertible and Miller Market.

Diversification Opportunities for Miller Convertible and Miller Market

0.67

Correlation Coefficient

Miller Convertible  Miller Market

Poor diversification

The 3 months correlation between Miller and Miller is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Miller Vertible Bond and Miller Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Market Neutral 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 Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Market Neutral has no effect on the direction of Miller Convertible i.e., Miller Convertible and Miller Market go up and down completely randomly.

Pair Corralation between Miller Convertible and Miller Market

Assuming the 90 days horizon Miller Vertible Bond is expected to generate 0.16 times more return on investment than Miller Market. However, Miller Vertible Bond is 6.42 times less risky than Miller Market. It trades about 0.05 of its potential returns per unit of risk. Miller Market Neutral is currently generating about -0.05 per unit of risk. If you would invest  1,169  in Miller Vertible Bond on October 11, 2024 and sell it today you would earn a total of  97.00  from holding Miller Vertible Bond or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	52.53%
Values	Daily Returns

Miller Vertible Bond  vs.  Miller Market Neutral

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 Market Neutral

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Market Neutral are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Miller Market 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 Market

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

The idea behind Miller Vertible Bond and Miller Market Neutral 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.