Correlation Between Kraft Heinz and Archer Daniels

Can any of the company-specific risk be diversified away by investing in both Kraft Heinz and Archer Daniels 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 Archer Daniels 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 Archer Daniels Midland, you can compare the effects of market volatilities on Kraft Heinz and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and Archer Daniels.

Diversification Opportunities for Kraft Heinz and Archer Daniels

0.08

Correlation Coefficient

Kraft Heinz  Archer Daniels

Significant diversification

The 3 months correlation between Kraft and Archer is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Archer Daniels go up and down completely randomly.

Pair Corralation between Kraft Heinz and Archer Daniels

Considering the 90-day investment horizon Kraft Heinz Co is expected to generate 0.89 times more return on investment than Archer Daniels. However, Kraft Heinz Co is 1.13 times less risky than Archer Daniels. It trades about 0.01 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.01 per unit of risk. If you would invest  2,997  in Kraft Heinz Co on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Kraft Heinz Co or generate 0.33% return on investment over 90 days.

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

Kraft Heinz Co  vs.  Archer Daniels Midland

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.

Archer Daniels Midland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Archer Daniels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kraft Heinz and Archer Daniels

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

The idea behind Kraft Heinz Co and Archer Daniels Midland 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.