Correlation Between Miller Income and Miller Opportunity
Can any of the company-specific risk be diversified away by investing in both Miller Income 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 Miller Income and Miller Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Miller Income Fund and Miller Opportunity Trust, you can compare the effects of market volatilities on Miller Income 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 Miller Income with a short position of Miller Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Income and Miller Opportunity.
Diversification Opportunities for Miller Income and Miller Opportunity
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Miller and Miller is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Miller Income Fund 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 Miller Income 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 Miller Income Fund 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 Miller Income i.e., Miller Income and Miller Opportunity go up and down completely randomly.
Pair Corralation between Miller Income and Miller Opportunity
Assuming the 90 days horizon Miller Income Fund is expected to generate 1.25 times more return on investment than Miller Opportunity. However, Miller Income is 1.25 times more volatile than Miller Opportunity Trust. It trades about 0.24 of its potential returns per unit of risk. Miller Opportunity Trust is currently generating about 0.28 per unit of risk. If you would invest 852.00 in Miller Income Fund on August 29, 2024 and sell it today you would earn a total of 72.00 from holding Miller Income Fund or generate 8.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Miller Income Fund vs. Miller Opportunity Trust
Performance |
| Timeline |
| Miller Income |
| Miller Opportunity Trust |
Miller Income and Miller Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Miller Income and Miller Opportunity
The main advantage of trading using opposite Miller Income and Miller Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miller Income 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.| Miller Income vs. Prudential Jennison Financial | Miller Income vs. Hennessy Large Cap | Miller Income vs. John Hancock Financial | Miller Income vs. Financial Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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