Correlation Between GM and Miller Income
Can any of the company-specific risk be diversified away by investing in both GM and Miller Income 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 GM and Miller Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Miller Income Fund, you can compare the effects of market volatilities on GM and Miller Income 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 GM with a short position of Miller Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Miller Income.
Diversification Opportunities for GM and Miller Income
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Miller is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Miller Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Income and GM 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 General Motors are associated (or correlated) with Miller Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Income has no effect on the direction of GM i.e., GM and Miller Income go up and down completely randomly.
Pair Corralation between GM and Miller Income
Allowing for the 90-day total investment horizon GM is expected to generate 1.8 times less return on investment than Miller Income. In addition to that, GM is 1.85 times more volatile than Miller Income Fund. It trades about 0.07 of its total potential returns per unit of risk. Miller Income Fund is currently generating about 0.24 per unit of volatility. If you would invest 849.00 in Miller Income Fund on August 29, 2024 and sell it today you would earn a total of 73.00 from holding Miller Income Fund or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Miller Income Fund
Performance |
| Timeline |
| General Motors |
| Miller Income |
GM and Miller Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Miller Income
The main advantage of trading using opposite GM and Miller Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Miller Income 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 Income will offset losses from the drop in Miller Income's long position.The idea behind General Motors and Miller Income Fund 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.| Miller Income vs. Blackrock Conservative Prprdptfinstttnl | Miller Income vs. Pioneer Diversified High | Miller Income vs. Guggenheim Diversified Income | Miller Income vs. Western Asset Diversified |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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