Correlation Between Absolute Convertible and Miller Convertible
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and Miller Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Miller Vertible Bond, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of Miller Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Miller Convertible.
Diversification Opportunities for Absolute Convertible and Miller Convertible
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Miller is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage 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 Absolute 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 Absolute Convertible Arbitrage 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 Absolute Convertible i.e., Absolute Convertible and Miller Convertible go up and down completely randomly.
Pair Corralation between Absolute Convertible and Miller Convertible
Assuming the 90 days horizon Absolute Convertible is expected to generate 1.05 times less return on investment than Miller Convertible. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 7.07 times less risky than Miller Convertible. It trades about 0.63 of its potential returns per unit of risk. Miller Vertible Bond is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,260 in Miller Vertible Bond on August 29, 2024 and sell it today you would earn a total of 52.00 from holding Miller Vertible Bond or generate 4.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Miller Vertible Bond
Performance |
| Timeline |
| Absolute Convertible |
| Miller Vertible Bond |
Absolute Convertible and Miller Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Miller Convertible
The main advantage of trading using opposite Absolute Convertible and Miller Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Calamos Market Neutral | Absolute Convertible vs. Calamos Market Neutral |
| Miller Convertible vs. Miller Opportunity Trust | Miller Convertible vs. Miller Vertible Bond | Miller Convertible vs. Miller Vertible Bond | Miller Convertible vs. Miller Opportunity Trust |
Check out your portfolio center.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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