Correlation Between Kraft Heinz and Verizon Communications

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

By analyzing existing cross correlation between The Kraft Heinz and Verizon Communications, you can compare the effects of market volatilities on Kraft Heinz and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and Verizon Communications.

Diversification Opportunities for Kraft Heinz and Verizon Communications

0.02

Correlation Coefficient

Kraft Heinz  Verizon Communications

Significant diversification

The 3 months correlation between Kraft and Verizon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Kraft Heinz and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 The Kraft Heinz are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Verizon Communications go up and down completely randomly.

Pair Corralation between Kraft Heinz and Verizon Communications

Assuming the 90 days trading horizon Kraft Heinz is expected to generate 1.99 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, The Kraft Heinz is 1.08 times less risky than Verizon Communications. It trades about 0.05 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,698  in Verizon Communications on September 28, 2024 and sell it today you would earn a total of  1,418  from holding Verizon Communications or generate 52.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.7%
Values	Daily Returns

The Kraft Heinz  vs.  Verizon Communications

Kraft Heinz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Kraft Heinz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Kraft Heinz is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Verizon Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kraft Heinz and Verizon Communications

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

The idea behind The Kraft Heinz and Verizon Communications 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.