Correlation Between Nutrien and Scotts Miracle

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

By analyzing existing cross correlation between Nutrien and Scotts Miracle Gro, you can compare the effects of market volatilities on Nutrien and Scotts Miracle 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 Nutrien with a short position of Scotts Miracle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nutrien and Scotts Miracle.

Diversification Opportunities for Nutrien and Scotts Miracle

0.7

Correlation Coefficient

Nutrien  Scotts Miracle

Poor diversification

The 3 months correlation between Nutrien and Scotts is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nutrien and Scotts Miracle Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotts Miracle Gro and Nutrien 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 Nutrien are associated (or correlated) with Scotts Miracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scotts Miracle Gro has no effect on the direction of Nutrien i.e., Nutrien and Scotts Miracle go up and down completely randomly.

Pair Corralation between Nutrien and Scotts Miracle

Considering the 90-day investment horizon Nutrien is expected to generate 6.14 times less return on investment than Scotts Miracle. But when comparing it to its historical volatility, Nutrien is 2.38 times less risky than Scotts Miracle. It trades about 0.02 of its potential returns per unit of risk. Scotts Miracle Gro is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,993  in Scotts Miracle Gro on September 3, 2024 and sell it today you would earn a total of  716.00  from holding Scotts Miracle Gro or generate 10.24% return on investment over 90 days.

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

Nutrien  vs.  Scotts Miracle Gro

Nutrien

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nutrien is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Scotts Miracle Gro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scotts Miracle Gro are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Scotts Miracle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nutrien and Scotts Miracle

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

The idea behind Nutrien and Scotts Miracle Gro 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.