Correlation Between Kraft Heinz and Kellogg

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

Diversification Opportunities for Kraft Heinz and Kellogg

-0.53

Correlation Coefficient

Kraft Heinz  Kellogg

Excellent diversification

The 3 months correlation between Kraft and Kellogg is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Kellogg Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellogg Company 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 Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellogg Company has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Kellogg go up and down completely randomly.

Pair Corralation between Kraft Heinz and Kellogg

Assuming the 90 days trading horizon Kraft Heinz Co is expected to under-perform the Kellogg. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.18 times less risky than Kellogg. The stock trades about -0.02 of its potential returns per unit of risk. The Kellogg Company is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,757  in Kellogg Company on September 4, 2024 and sell it today you would earn a total of  2,859  from holding Kellogg Company or generate 60.1% 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.  Kellogg Company

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

Kellogg Company

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kellogg Company are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kellogg is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kraft Heinz and Kellogg

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

The idea behind Kraft Heinz Co and Kellogg Company 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.