Correlation Between Kraft Heinz and Philip Morris

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

Diversification Opportunities for Kraft Heinz and Philip Morris

-0.54

Correlation Coefficient

Kraft Heinz  Philip Morris

Excellent diversification

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

Pair Corralation between Kraft Heinz and Philip Morris

Considering the 90-day investment horizon Kraft Heinz Co is expected to under-perform the Philip Morris. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.72 times less risky than Philip Morris. The stock trades about -0.14 of its potential returns per unit of risk. The Philip Morris International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,432  in Philip Morris International on September 1, 2024 and sell it today you would earn a total of  874.00  from holding Philip Morris International or generate 7.03% return on investment over 90 days.

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

Kraft Heinz Co  vs.  Philip Morris International

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 latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Philip Morris Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kraft Heinz and Philip Morris

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

The idea behind Kraft Heinz Co and Philip Morris International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.