Correlation Between Scotts Miracle and Corteva
Can any of the company-specific risk be diversified away by investing in both Scotts Miracle and Corteva 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 and Corteva into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scotts Miracle Gro and Corteva, you can compare the effects of market volatilities on Scotts Miracle and Corteva 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 with a short position of Corteva. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotts Miracle and Corteva.
Diversification Opportunities for Scotts Miracle and Corteva
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scotts and Corteva is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Scotts Miracle Gro and Corteva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corteva and Scotts Miracle 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 Scotts Miracle Gro are associated (or correlated) with Corteva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corteva has no effect on the direction of Scotts Miracle i.e., Scotts Miracle and Corteva go up and down completely randomly.
Pair Corralation between Scotts Miracle and Corteva
Considering the 90-day investment horizon Scotts Miracle Gro is expected to under-perform the Corteva. In addition to that, Scotts Miracle is 2.43 times more volatile than Corteva. It trades about -0.09 of its total potential returns per unit of risk. Corteva is currently generating about 0.01 per unit of volatility. If you would invest 6,113 in Corteva on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Corteva or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scotts Miracle Gro vs. Corteva
Performance |
| Timeline |
| Scotts Miracle Gro |
| Corteva |
Scotts Miracle and Corteva Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scotts Miracle and Corteva
The main advantage of trading using opposite Scotts Miracle and Corteva positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotts Miracle position performs unexpectedly, Corteva 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 Corteva will offset losses from the drop in Corteva's long position.The idea behind Scotts Miracle Gro and Corteva 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.| Corteva vs. CF Industries Holdings | Corteva vs. American Vanguard | Corteva vs. Intrepid Potash | Corteva 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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