Correlation Between Scotts Miracle and CVR Partners

Can any of the company-specific risk be diversified away by investing in both Scotts Miracle and CVR Partners 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 CVR Partners 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 CVR Partners LP, you can compare the effects of market volatilities on Scotts Miracle and CVR Partners 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 CVR Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scotts Miracle and CVR Partners.

Diversification Opportunities for Scotts Miracle and CVR Partners

-0.61

Correlation Coefficient

Scotts Miracle  CVR Partners

Excellent diversification

The 3 months correlation between Scotts and CVR is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Scotts Miracle Gro and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP 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 CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of Scotts Miracle i.e., Scotts Miracle and CVR Partners go up and down completely randomly.

Pair Corralation between Scotts Miracle and CVR Partners

Considering the 90-day investment horizon Scotts Miracle Gro is expected to generate 1.44 times more return on investment than CVR Partners. However, Scotts Miracle is 1.44 times more volatile than CVR Partners LP. It trades about 0.03 of its potential returns per unit of risk. CVR Partners LP is currently generating about 0.02 per unit of risk. If you would invest  5,122  in Scotts Miracle Gro on September 27, 2024 and sell it today you would earn a total of  1,589  from holding Scotts Miracle Gro or generate 31.02% return on investment over 90 days.

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

Scotts Miracle Gro  vs.  CVR Partners LP

Scotts Miracle Gro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scotts Miracle Gro has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CVR Partners LP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, CVR Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scotts Miracle and CVR Partners

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

The idea behind Scotts Miracle Gro and CVR Partners LP 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.