Correlation Between Nasdaq 100 and Miller Opportunity

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Miller Opportunity 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 Nasdaq 100 and Miller Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Miller Opportunity Trust, you can compare the effects of market volatilities on Nasdaq 100 and Miller Opportunity 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 Nasdaq 100 with a short position of Miller Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Miller Opportunity.

Diversification Opportunities for Nasdaq 100 and Miller Opportunity

0.75

Correlation Coefficient

Nasdaq 100  Miller Opportunity

Poor diversification

The 3 months correlation between Nasdaq and Miller is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Miller Opportunity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Opportunity Trust and Nasdaq 100 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 Nasdaq 100 2x Strategy are associated (or correlated) with Miller Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Opportunity Trust has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Miller Opportunity go up and down completely randomly.

Pair Corralation between Nasdaq 100 and Miller Opportunity

Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.83 times less return on investment than Miller Opportunity. In addition to that, Nasdaq 100 is 1.99 times more volatile than Miller Opportunity Trust. It trades about 0.03 of its total potential returns per unit of risk. Miller Opportunity Trust is currently generating about 0.12 per unit of volatility. If you would invest  3,507  in Miller Opportunity Trust on October 10, 2024 and sell it today you would earn a total of  306.00  from holding Miller Opportunity Trust or generate 8.73% return on investment over 90 days.

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

Nasdaq 100 2x Strategy  vs.  Miller Opportunity Trust

Nasdaq 100 2x

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq 100 2x Strategy are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nasdaq 100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Miller Opportunity Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Opportunity Trust are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Miller Opportunity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nasdaq 100 and Miller Opportunity

The main advantage of trading using opposite Nasdaq 100 and Miller Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Miller Opportunity 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 Opportunity will offset losses from the drop in Miller Opportunity's long position.

The idea behind Nasdaq 100 2x Strategy and Miller Opportunity Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.