Correlation Between Miller Opportunity and Miller Income
Can any of the company-specific risk be diversified away by investing in both Miller Opportunity 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 Miller Opportunity and Miller Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Miller Opportunity Trust and Miller Income Fund, you can compare the effects of market volatilities on Miller Opportunity 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 Miller Opportunity with a short position of Miller Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Opportunity and Miller Income.
Diversification Opportunities for Miller Opportunity and Miller Income
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Miller and Miller is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Miller Opportunity Trust and Miller Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Income and Miller Opportunity 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 Opportunity Trust 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 Miller Opportunity i.e., Miller Opportunity and Miller Income go up and down completely randomly.
Pair Corralation between Miller Opportunity and Miller Income
Assuming the 90 days horizon Miller Opportunity is expected to generate 1.26 times less return on investment than Miller Income. But when comparing it to its historical volatility, Miller Opportunity Trust is 1.23 times less risky than Miller Income. It trades about 0.24 of its potential returns per unit of risk. Miller Income Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 847.00 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 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Miller Opportunity Trust vs. Miller Income Fund
Performance |
| Timeline |
| Miller Opportunity Trust |
| Miller Income |
Miller Opportunity and Miller Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Miller Opportunity and Miller Income
The main advantage of trading using opposite Miller Opportunity and Miller Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miller Opportunity 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 Miller Opportunity Trust 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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