Correlation Between Scotts Miracle and Danakali
Can any of the company-specific risk be diversified away by investing in both Scotts Miracle and Danakali 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 Danakali 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 Danakali, you can compare the effects of market volatilities on Scotts Miracle and Danakali 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 Danakali. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotts Miracle and Danakali.
Diversification Opportunities for Scotts Miracle and Danakali
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scotts and Danakali is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Scotts Miracle Gro and Danakali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danakali 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 Danakali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danakali has no effect on the direction of Scotts Miracle i.e., Scotts Miracle and Danakali go up and down completely randomly.
Pair Corralation between Scotts Miracle and Danakali
Considering the 90-day investment horizon Scotts Miracle is expected to generate 6.21 times less return on investment than Danakali. But when comparing it to its historical volatility, Scotts Miracle Gro is 4.54 times less risky than Danakali. It trades about 0.05 of its potential returns per unit of risk. Danakali is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Danakali on September 14, 2024 and sell it today you would lose (6.00) from holding Danakali or give up 26.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 69.23% |
| Values | Daily Returns |
Scotts Miracle Gro vs. Danakali
Performance |
| Timeline |
| Scotts Miracle Gro |
| Danakali |
Scotts Miracle and Danakali Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scotts Miracle and Danakali
The main advantage of trading using opposite Scotts Miracle and Danakali positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotts Miracle position performs unexpectedly, Danakali 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 Danakali will offset losses from the drop in Danakali's long position.| Scotts Miracle vs. Corteva | Scotts Miracle vs. CF Industries Holdings | Scotts Miracle vs. American Vanguard | Scotts Miracle vs. Intrepid Potash |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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