Correlation Between SBM OFFSHORE and Scotts Miracle-Gro

Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE and The Scotts Miracle Gro, you can compare the effects of market volatilities on SBM OFFSHORE 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 SBM OFFSHORE with a short position of Scotts Miracle-Gro. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Scotts Miracle-Gro.

Diversification Opportunities for SBM OFFSHORE and Scotts Miracle-Gro

0.83

Correlation Coefficient

SBM OFFSHORE  Scotts Miracle-Gro

Very poor diversification

The 3 months correlation between SBM and Scotts is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and The Scotts Miracle Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotts Miracle-Gro and SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE i.e., SBM OFFSHORE and Scotts Miracle-Gro go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Scotts Miracle-Gro

Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 0.64 times more return on investment than Scotts Miracle-Gro. However, SBM OFFSHORE is 1.57 times less risky than Scotts Miracle-Gro. It trades about 0.08 of its potential returns per unit of risk. The Scotts Miracle Gro is currently generating about 0.02 per unit of risk. If you would invest  1,197  in SBM OFFSHORE on April 7, 2025 and sell it today you would earn a total of  1,071  from holding SBM OFFSHORE or generate 89.47% return on investment over 90 days.

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

SBM OFFSHORE  vs.  The Scotts Miracle Gro

SBM OFFSHORE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SBM OFFSHORE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Scotts Miracle-Gro

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Scotts Miracle Gro are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scotts Miracle-Gro reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBM OFFSHORE and Scotts Miracle-Gro

The main advantage of trading using opposite SBM OFFSHORE and Scotts Miracle-Gro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE 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.

The idea behind SBM OFFSHORE and The 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.