Correlation Between Scotts Miracle and Newell Brands

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

Diversification Opportunities for Scotts Miracle and Newell Brands

-0.36

Correlation Coefficient

Scotts Miracle  Newell Brands

Very good diversification

The 3 months correlation between Scotts and Newell is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Scotts Miracle Gro and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Scotts Miracle i.e., Scotts Miracle and Newell Brands go up and down completely randomly.

Pair Corralation between Scotts Miracle and Newell Brands

Considering the 90-day investment horizon Scotts Miracle Gro is expected to generate 0.88 times more return on investment than Newell Brands. However, Scotts Miracle Gro is 1.14 times less risky than Newell Brands. It trades about 0.05 of its potential returns per unit of risk. Newell Brands is currently generating about -0.13 per unit of risk. If you would invest  6,753  in Scotts Miracle Gro on January 17, 2024 and sell it today you would earn a total of  120.00  from holding Scotts Miracle Gro or generate 1.78% return on investment over 90 days.

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

Scotts Miracle Gro  vs.  Newell Brands

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 conflicting primary indicators, Scotts Miracle reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Scotts Miracle and Newell Brands

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

The idea behind Scotts Miracle Gro and Newell Brands 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.