Correlation Between Ralph Lauren and Scotts Miracle

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

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

Diversification Opportunities for Ralph Lauren and Scotts Miracle

0.45

Correlation Coefficient

Ralph Lauren  Scotts Miracle

Very weak diversification

The 3 months correlation between Ralph and Scotts is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp 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 Ralph Lauren 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 Ralph Lauren Corp 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 Ralph Lauren i.e., Ralph Lauren and Scotts Miracle go up and down completely randomly.

Pair Corralation between Ralph Lauren and Scotts Miracle

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to under-perform the Scotts Miracle. But the stock apears to be less risky and, when comparing its historical volatility, Ralph Lauren Corp is 1.11 times less risky than Scotts Miracle. The stock trades about -0.2 of its potential returns per unit of risk. The Scotts Miracle Gro is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  7,257  in Scotts Miracle Gro on January 25, 2024 and sell it today you would lose (399.00) from holding Scotts Miracle Gro or give up 5.5% of portfolio value over 90 days.

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

Ralph Lauren Corp  vs.  Scotts Miracle Gro

Ralph Lauren Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Scotts Miracle Gro

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scotts Miracle Gro are ranked lower than 10 (%) 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 Ralph Lauren and Scotts Miracle

The main advantage of trading using opposite Ralph Lauren and Scotts Miracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren 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 Ralph Lauren Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.