Correlation Between Kraft Heinz and Danaher

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

Diversification Opportunities for Kraft Heinz and Danaher

0.63

Correlation Coefficient

Kraft Heinz  Danaher

Poor diversification

The 3 months correlation between Kraft and Danaher is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Danaher go up and down completely randomly.

Pair Corralation between Kraft Heinz and Danaher

Assuming the 90 days trading horizon Kraft Heinz Co is expected to under-perform the Danaher. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.88 times less risky than Danaher. The stock trades about -0.03 of its potential returns per unit of risk. The Danaher is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  669.00  in Danaher on December 21, 2024 and sell it today you would lose (13.00) from holding Danaher or give up 1.94% of portfolio value over 90 days.

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

Kraft Heinz Co  vs.  Danaher

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. Despite nearly stable basic indicators, Kraft Heinz is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Danaher

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Danaher is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kraft Heinz and Danaher

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

The idea behind Kraft Heinz Co and Danaher 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.