Correlation Between Kraft Heinz and Tootsie Roll

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

Diversification Opportunities for Kraft Heinz and Tootsie Roll

-0.44

Correlation Coefficient

Kraft Heinz  Tootsie Roll

Very good diversification

The 3 months correlation between Kraft and Tootsie is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Tootsie Roll Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tootsie Roll Industries 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 Tootsie Roll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tootsie Roll Industries has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Tootsie Roll go up and down completely randomly.

Pair Corralation between Kraft Heinz and Tootsie Roll

Considering the 90-day investment horizon Kraft Heinz Co is expected to under-perform the Tootsie Roll. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.22 times less risky than Tootsie Roll. The stock trades about -0.2 of its potential returns per unit of risk. The Tootsie Roll Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,087  in Tootsie Roll Industries on August 30, 2024 and sell it today you would earn a total of  215.00  from holding Tootsie Roll Industries or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

Kraft Heinz Co  vs.  Tootsie Roll Industries

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.

Tootsie Roll Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tootsie Roll may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kraft Heinz and Tootsie Roll

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

The idea behind Kraft Heinz Co and Tootsie Roll Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.