Correlation Between Miller Intermediate and Miller Convertible

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

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

Diversification Opportunities for Miller Intermediate and Miller Convertible

0.85

Correlation Coefficient

Miller Intermediate  Miller Convertible

Very poor diversification

The 3 months correlation between Miller and Miller is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Miller Intermediate Bond and Miller Vertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Vertible Bond and Miller Intermediate 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 Intermediate Bond are associated (or correlated) with Miller Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Vertible Bond has no effect on the direction of Miller Intermediate i.e., Miller Intermediate and Miller Convertible go up and down completely randomly.

Pair Corralation between Miller Intermediate and Miller Convertible

Assuming the 90 days horizon Miller Intermediate is expected to generate 1.3 times less return on investment than Miller Convertible. But when comparing it to its historical volatility, Miller Intermediate Bond is 1.37 times less risky than Miller Convertible. It trades about 0.1 of its potential returns per unit of risk. Miller Vertible Bond is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Miller Vertible Bond on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Miller Vertible Bond or generate 0.55% return on investment over 90 days.

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

Miller Intermediate Bond  vs.  Miller Vertible Bond

Miller Intermediate Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Intermediate Bond are ranked lower than 5 (%) 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.

Miller Vertible Bond

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Vertible Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Miller Intermediate and Miller Convertible

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

The idea behind Miller Intermediate Bond and Miller Vertible 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.