Correlation Between Miller Industries and Lear

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

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

Diversification Opportunities for Miller Industries and Lear

-0.7

Correlation Coefficient

Miller Industries  Lear

Excellent diversification

The 3 months correlation between Miller and Lear is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Miller Industries and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Miller Industries 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 Industries are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Miller Industries i.e., Miller Industries and Lear go up and down completely randomly.

Pair Corralation between Miller Industries and Lear

Considering the 90-day investment horizon Miller Industries is expected to generate 1.33 times more return on investment than Lear. However, Miller Industries is 1.33 times more volatile than Lear Corporation. It trades about 0.14 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.06 per unit of risk. If you would invest  5,863  in Miller Industries on September 17, 2024 and sell it today you would earn a total of  1,277  from holding Miller Industries or generate 21.78% return on investment over 90 days.

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

Miller Industries  vs.  Lear Corp.

Miller Industries

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, Miller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Lear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lear Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Miller Industries and Lear

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

The idea behind Miller Industries and Lear Corporation 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.