Correlation Between Miller Market and The Arbitrage

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

By analyzing existing cross correlation between Miller Market Neutral and The Arbitrage Event Driven, you can compare the effects of market volatilities on Miller Market and The Arbitrage 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 Market with a short position of The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Market and The Arbitrage.

Diversification Opportunities for Miller Market and The Arbitrage

0.86

Correlation Coefficient

Miller Market  The Arbitrage

Very poor diversification

The 3 months correlation between Miller and The is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Miller Market Neutral and The Arbitrage Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Event and Miller Market 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 Market Neutral are associated (or correlated) with The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Event has no effect on the direction of Miller Market i.e., Miller Market and The Arbitrage go up and down completely randomly.

Pair Corralation between Miller Market and The Arbitrage

Assuming the 90 days horizon Miller Market is expected to generate 1.61 times less return on investment than The Arbitrage. But when comparing it to its historical volatility, Miller Market Neutral is 1.27 times less risky than The Arbitrage. It trades about 0.36 of its potential returns per unit of risk. The Arbitrage Event Driven is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  1,195  in The Arbitrage Event Driven on April 25, 2025 and sell it today you would earn a total of  38.00  from holding The Arbitrage Event Driven or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Miller Market Neutral  vs.  The Arbitrage Event Driven

Miller Market Neutral

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Market Neutral are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Miller Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arbitrage Event

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Event Driven are ranked lower than 35 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Arbitrage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Miller Market and The Arbitrage

The main advantage of trading using opposite Miller Market and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miller Market position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.

The idea behind Miller Market Neutral and The Arbitrage Event Driven 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..