Correlation Between Newell Brands and Scotts Miracle

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

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

Diversification Opportunities for Newell Brands and Scotts Miracle

-0.36

Correlation Coefficient

Newell Brands  Scotts Miracle

Very good diversification

The 3 months correlation between Newell and Scotts is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Newell Brands 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 Newell Brands 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 Newell Brands 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 Newell Brands i.e., Newell Brands and Scotts Miracle go up and down completely randomly.

Pair Corralation between Newell Brands and Scotts Miracle

Considering the 90-day investment horizon Newell Brands is expected to under-perform the Scotts Miracle. In addition to that, Newell Brands is 1.0 times more volatile than Scotts Miracle Gro. It trades about -0.05 of its total potential returns per unit of risk. Scotts Miracle Gro is currently generating about 0.02 per unit of volatility. If you would invest  6,568  in Scotts Miracle Gro on January 20, 2024 and sell it today you would earn a total of  228.00  from holding Scotts Miracle Gro or generate 3.47% return on investment over 90 days.

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

Newell Brands  vs.  Scotts Miracle Gro

Newell Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newell Brands 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 basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Scotts Miracle Gro

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scotts Miracle Gro are ranked lower than 7 (%) 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 Newell Brands and Scotts Miracle

The main advantage of trading using opposite Newell Brands and Scotts Miracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newell Brands 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 Newell Brands 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.