Correlation Between Kraft Heinz and Preferred Commerce

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

Diversification Opportunities for Kraft Heinz and Preferred Commerce

-0.71

Correlation Coefficient

Kraft Heinz  Preferred Commerce

Pay attention - limited upside

The 3 months correlation between Kraft and Preferred is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Preferred Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Commerce 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 Preferred Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Commerce has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Preferred Commerce go up and down completely randomly.

Pair Corralation between Kraft Heinz and Preferred Commerce

Considering the 90-day investment horizon Kraft Heinz Co is expected to under-perform the Preferred Commerce. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 11.16 times less risky than Preferred Commerce. The stock trades about -0.1 of its potential returns per unit of risk. The Preferred Commerce is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Preferred Commerce on September 27, 2024 and sell it today you would earn a total of  214.00  from holding Preferred Commerce or generate 159.7% return on investment over 90 days.

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

Kraft Heinz Co  vs.  Preferred Commerce

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.

Preferred Commerce

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Commerce are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Preferred Commerce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kraft Heinz and Preferred Commerce

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

The idea behind Kraft Heinz Co and Preferred Commerce 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.