Correlation Between Scotts Miracle and Yara International

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

Diversification Opportunities for Scotts Miracle and Yara International

0.64

Correlation Coefficient

Scotts Miracle  Yara International

Poor diversification

The 3 months correlation between Scotts and Yara is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scotts Miracle Gro and Yara International ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yara International ASA 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 Yara International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yara International ASA has no effect on the direction of Scotts Miracle i.e., Scotts Miracle and Yara International go up and down completely randomly.

Pair Corralation between Scotts Miracle and Yara International

Considering the 90-day investment horizon Scotts Miracle Gro is expected to under-perform the Yara International. In addition to that, Scotts Miracle is 2.67 times more volatile than Yara International ASA. It trades about -0.13 of its total potential returns per unit of risk. Yara International ASA is currently generating about -0.22 per unit of volatility. If you would invest  3,068  in Yara International ASA on September 4, 2024 and sell it today you would lose (257.00) from holding Yara International ASA or give up 8.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Scotts Miracle Gro  vs.  Yara International ASA

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.

Yara International ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yara International ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Yara International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scotts Miracle and Yara International

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

The idea behind Scotts Miracle Gro and Yara International ASA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.