Correlation Between Vroom and Scotts Miracle-Gro

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Can any of the company-specific risk be diversified away by investing in both Vroom and Scotts Miracle-Gro 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 Vroom and Scotts Miracle-Gro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vroom Inc and Scotts Miracle-Gro, you can compare the effects of market volatilities on Vroom and Scotts Miracle-Gro 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 Vroom with a short position of Scotts Miracle-Gro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vroom and Scotts Miracle-Gro.

Diversification Opportunities for Vroom and Scotts Miracle-Gro

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vroom and Scotts is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc 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 Vroom 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 Vroom Inc are associated (or correlated) with Scotts Miracle-Gro. 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 Vroom i.e., Vroom and Scotts Miracle-Gro go up and down completely randomly.

Pair Corralation between Vroom and Scotts Miracle-Gro

Considering the 90-day investment horizon Vroom is expected to generate 10.39 times less return on investment than Scotts Miracle-Gro. In addition to that, Vroom is 1.39 times more volatile than Scotts Miracle-Gro. It trades about 0.01 of its total potential returns per unit of risk. Scotts Miracle-Gro is currently generating about 0.16 per unit of volatility. If you would invest  4,322  in Scotts Miracle-Gro on September 2, 2022 and sell it today you would earn a total of  1,201  from holding Scotts Miracle-Gro or generate 27.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vroom Inc  vs.  Scotts Miracle-Gro

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with sluggish performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

Scotts Miracle-Gro 
Scotts Performance
0 of 100
Over the last 90 days Scotts Miracle-Gro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Scotts Miracle-Gro is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Scotts Price Channel

Vroom and Scotts Miracle-Gro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Scotts Miracle-Gro

The main advantage of trading using opposite Vroom and Scotts Miracle-Gro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom position performs unexpectedly, Scotts Miracle-Gro 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-Gro will offset losses from the drop in Scotts Miracle-Gro's long position.
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The idea behind Vroom Inc 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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