Correlation Between Ford and Miller Opportunity

Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Miller Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Miller Opportunity Trust, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Miller Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Miller Opportunity.

Diversification Opportunities for Ford and Miller Opportunity

0.36

Correlation Coefficient

Ford  Miller Opportunity

Weak diversification

The 3 months correlation between Ford and Miller is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Miller Opportunity go up and down completely randomly.

Pair Corralation between Ford and Miller Opportunity

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Miller Opportunity. In addition to that, Ford is 1.87 times more volatile than Miller Opportunity Trust. It trades about -0.05 of its total potential returns per unit of risk. Miller Opportunity Trust is currently generating about 0.2 per unit of volatility. If you would invest  3,791  in Miller Opportunity Trust on September 18, 2024 and sell it today you would earn a total of  542.00  from holding Miller Opportunity Trust or generate 14.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ford Motor  vs.  Miller Opportunity Trust

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Miller Opportunity Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Opportunity Trust are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Miller Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Miller Opportunity

The main advantage of trading using opposite Ford and Miller Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.