Correlation Between Kraft Heinz and A2 Milk

Can any of the company-specific risk be diversified away by investing in both Kraft Heinz and A2 Milk 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 Kraft Heinz and A2 Milk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kraft Heinz Co and The A2 Milk, you can compare the effects of market volatilities on Kraft Heinz and A2 Milk 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 Kraft Heinz with a short position of A2 Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and A2 Milk.

Diversification Opportunities for Kraft Heinz and A2 Milk

0.54

Correlation Coefficient

Kraft Heinz  A2 Milk

Very weak diversification

The 3 months correlation between Kraft and ACOPY is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Kraft Heinz 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 Kraft Heinz Co are associated (or correlated) with A2 Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A2 Milk has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and A2 Milk go up and down completely randomly.

Pair Corralation between Kraft Heinz and A2 Milk

Considering the 90-day investment horizon Kraft Heinz is expected to generate 470.06 times less return on investment than A2 Milk. But when comparing it to its historical volatility, Kraft Heinz Co is 2.22 times less risky than A2 Milk. It trades about 0.0 of its potential returns per unit of risk. The A2 Milk is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  334.00  in The A2 Milk on December 27, 2024 and sell it today you would earn a total of  203.00  from holding The A2 Milk or generate 60.78% return on investment over 90 days.

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

Kraft Heinz Co  vs.  The A2 Milk

Kraft Heinz

Risk-Adjusted Performance

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 rather sound technical indicators, Kraft Heinz is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

A2 Milk

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The A2 Milk are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, A2 Milk showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kraft Heinz and A2 Milk

The main advantage of trading using opposite Kraft Heinz and A2 Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz position performs unexpectedly, A2 Milk 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 A2 Milk will offset losses from the drop in A2 Milk's long position.

The idea behind Kraft Heinz Co and The A2 Milk 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.