Correlation Between AeroVironment and Scotts Miracle

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

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

Diversification Opportunities for AeroVironment and Scotts Miracle

0.81

Correlation Coefficient

AeroVironment  Scotts Miracle

Very poor diversification

The 3 months correlation between AeroVironment and Scotts is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and The Scotts Miracle Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scotts Miracle and AeroVironment 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 AeroVironment 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 has no effect on the direction of AeroVironment i.e., AeroVironment and Scotts Miracle go up and down completely randomly.

Pair Corralation between AeroVironment and Scotts Miracle

Assuming the 90 days horizon AeroVironment is expected to generate 4.67 times more return on investment than Scotts Miracle. However, AeroVironment is 4.67 times more volatile than The Scotts Miracle Gro. It trades about 0.28 of its potential returns per unit of risk. The Scotts Miracle Gro is currently generating about 0.3 per unit of risk. If you would invest  16,975  in AeroVironment on April 22, 2025 and sell it today you would earn a total of  6,765  from holding AeroVironment or generate 39.85% return on investment over 90 days.

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

AeroVironment  vs.  The Scotts Miracle Gro

AeroVironment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AeroVironment are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AeroVironment reported solid returns over the last few months and may actually be approaching a breakup point.

Scotts Miracle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Scotts Miracle Gro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scotts Miracle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AeroVironment and Scotts Miracle

The main advantage of trading using opposite AeroVironment and Scotts Miracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment 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 AeroVironment 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 Transaction History module to view history of all your transactions and understand their impact on performance.