Correlation Between Ameriprise Financial and KRAFT

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

By analyzing existing cross correlation between Ameriprise Financial and KRAFT FOODS INC, you can compare the effects of market volatilities on Ameriprise Financial and KRAFT 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 Ameriprise Financial with a short position of KRAFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and KRAFT.

Diversification Opportunities for Ameriprise Financial and KRAFT

0.64

Correlation Coefficient

Ameriprise Financial  KRAFT

Poor diversification

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

Pair Corralation between Ameriprise Financial and KRAFT

Considering the 90-day investment horizon Ameriprise Financial is expected to under-perform the KRAFT. But the stock apears to be less risky and, when comparing its historical volatility, Ameriprise Financial is 2.38 times less risky than KRAFT. The stock trades about -0.08 of its potential returns per unit of risk. The KRAFT FOODS INC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,134  in KRAFT FOODS INC on December 24, 2024 and sell it today you would earn a total of  573.00  from holding KRAFT FOODS INC or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.33%
Values	Daily Returns

Ameriprise Financial  vs.  KRAFT FOODS INC

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

KRAFT FOODS INC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KRAFT FOODS INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, KRAFT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and KRAFT

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

The idea behind Ameriprise Financial and KRAFT FOODS INC 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 Stocks Directory module to find actively traded stocks across global markets.