Correlation Between Associated British and Kraft Heinz

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

By analyzing existing cross correlation between Associated British Foods and Kraft Heinz Co, you can compare the effects of market volatilities on Associated British and Kraft Heinz 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 Associated British with a short position of Kraft Heinz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Kraft Heinz.

Diversification Opportunities for Associated British and Kraft Heinz

0.87

Correlation Coefficient

Associated British  Kraft Heinz

Very poor diversification

The 3 months correlation between Associated and Kraft is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Kraft Heinz Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz and Associated British 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 Associated British Foods are associated (or correlated) with Kraft Heinz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Heinz has no effect on the direction of Associated British i.e., Associated British and Kraft Heinz go up and down completely randomly.

Pair Corralation between Associated British and Kraft Heinz

Assuming the 90 days horizon Associated British Foods is expected to generate 1.27 times more return on investment than Kraft Heinz. However, Associated British is 1.27 times more volatile than Kraft Heinz Co. It trades about -0.09 of its potential returns per unit of risk. Kraft Heinz Co is currently generating about -0.17 per unit of risk. If you would invest  2,883  in Associated British Foods on September 20, 2024 and sell it today you would lose (262.00) from holding Associated British Foods or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Associated British Foods  vs.  Kraft Heinz Co

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kraft Heinz Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Associated British and Kraft Heinz

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

The idea behind Associated British Foods and Kraft Heinz Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.