Correlation Between GM and Miller Opportunity
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Miller Opportunity 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 Opportunity Trust, you can compare the effects of market volatilities on GM 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 GM with a short position of Miller Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Miller Opportunity.
Diversification Opportunities for GM and Miller Opportunity
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Miller is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 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 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 GM i.e., GM and Miller Opportunity go up and down completely randomly.
Pair Corralation between GM and Miller Opportunity
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.61 times more return on investment than Miller Opportunity. However, GM is 1.61 times more volatile than Miller Opportunity Trust. It trades about 0.31 of its potential returns per unit of risk. Miller Opportunity Trust is currently generating about 0.29 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Miller Opportunity Trust
Performance |
| Timeline |
| General Motors |
| Miller Opportunity Trust |
GM and Miller Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Miller Opportunity
The main advantage of trading using opposite GM and Miller Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Miller Opportunity vs. Miller Opportunity Trust | Miller Opportunity vs. Miller Income Fund | Miller Opportunity vs. Miller Income Fund | Miller Opportunity vs. Miller Income Fund |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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