Correlation Between Nestle SA and Kraft Heinz

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

By analyzing existing cross correlation between Nestle SA and Kraft Heinz Co, you can compare the effects of market volatilities on Nestle SA and Kraft Heinz 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 Nestle SA with a short position of Kraft Heinz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Kraft Heinz.

Diversification Opportunities for Nestle SA and Kraft Heinz

0.93

Correlation Coefficient

Nestle SA  Kraft Heinz

Almost no diversification

The 3 months correlation between Nestle and Kraft is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Kraft Heinz Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz and Nestle SA 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 Nestle SA are associated (or correlated) with Kraft Heinz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Heinz has no effect on the direction of Nestle SA i.e., Nestle SA and Kraft Heinz go up and down completely randomly.

Pair Corralation between Nestle SA and Kraft Heinz

Assuming the 90 days horizon Nestle SA is expected to under-perform the Kraft Heinz. In addition to that, Nestle SA is 1.06 times more volatile than Kraft Heinz Co. It trades about -0.04 of its total potential returns per unit of risk. Kraft Heinz Co is currently generating about -0.03 per unit of volatility. If you would invest  3,716  in Kraft Heinz Co on September 20, 2024 and sell it today you would lose (681.50) from holding Kraft Heinz Co or give up 18.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Nestle SA  vs.  Kraft Heinz Co

Nestle SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Nestle SA and Kraft Heinz

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

The idea behind Nestle SA and Kraft Heinz Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.