Correlation Between Scotts Miracle-Gro and CF Industries
Can any of the company-specific risk be diversified away by investing in both Scotts Miracle-Gro and CF 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 Scotts Miracle-Gro and CF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Scotts Miracle Gro and CF Industries Holdings, you can compare the effects of market volatilities on Scotts Miracle-Gro and CF 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 Scotts Miracle-Gro with a short position of CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotts Miracle-Gro and CF Industries.
Diversification Opportunities for Scotts Miracle-Gro and CF Industries
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scotts and C4F is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Scotts Miracle Gro and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings and Scotts Miracle-Gro 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 The Scotts Miracle Gro are associated (or correlated) with CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of Scotts Miracle-Gro i.e., Scotts Miracle-Gro and CF Industries go up and down completely randomly.
Pair Corralation between Scotts Miracle-Gro and CF Industries
Assuming the 90 days trading horizon Scotts Miracle-Gro is expected to generate 1.38 times less return on investment than CF Industries. In addition to that, Scotts Miracle-Gro is 1.61 times more volatile than CF Industries Holdings. It trades about 0.04 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.1 per unit of volatility. If you would invest 6,736 in CF Industries Holdings on September 3, 2024 and sell it today you would earn a total of 1,718 from holding CF Industries Holdings or generate 25.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Scotts Miracle Gro vs. CF Industries Holdings
Performance |
| Timeline |
| Scotts Miracle-Gro |
| CF Industries Holdings |
Scotts Miracle-Gro and CF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scotts Miracle-Gro and CF Industries
The main advantage of trading using opposite Scotts Miracle-Gro and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotts Miracle-Gro position performs unexpectedly, CF 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 CF Industries will offset losses from the drop in CF Industries' long position.| Scotts Miracle-Gro vs. MAGIC SOFTWARE ENTR | Scotts Miracle-Gro vs. Microchip Technology Incorporated | Scotts Miracle-Gro vs. CyberArk Software | Scotts Miracle-Gro vs. Vishay Intertechnology |
| CF Industries vs. Corteva | CF Industries vs. Corteva | CF Industries vs. Nutrien | CF Industries vs. The Mosaic |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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