Correlation Between Gentex and Miller Industries
Can any of the company-specific risk be diversified away by investing in both Gentex and Miller Industries 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 Gentex and Miller Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gentex and Miller Industries, you can compare the effects of market volatilities on Gentex and Miller Industries 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 Gentex with a short position of Miller Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Miller Industries.
Diversification Opportunities for Gentex and Miller Industries
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gentex and Miller is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Miller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Industries and Gentex 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 Gentex are associated (or correlated) with Miller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Industries has no effect on the direction of Gentex i.e., Gentex and Miller Industries go up and down completely randomly.
Pair Corralation between Gentex and Miller Industries
Given the investment horizon of 90 days Gentex is expected to generate 22.48 times less return on investment than Miller Industries. But when comparing it to its historical volatility, Gentex is 1.69 times less risky than Miller Industries. It trades about 0.01 of its potential returns per unit of risk. Miller Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,814 in Miller Industries on September 2, 2024 and sell it today you would earn a total of 1,548 from holding Miller Industries or generate 26.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gentex vs. Miller Industries
Performance |
| Timeline |
| Gentex |
| Miller Industries |
Gentex and Miller Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gentex and Miller Industries
The main advantage of trading using opposite Gentex and Miller Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex position performs unexpectedly, Miller Industries 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 Industries will offset losses from the drop in Miller Industries' long position.The idea behind Gentex and Miller Industries 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 Industries vs. Dorman Products | Miller Industries vs. Standard Motor Products | Miller Industries vs. Motorcar Parts of | Miller Industries vs. Douglas Dynamics |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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