Correlation Between Farmer Bros and Kraft Heinz

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Can any of the company-specific risk be diversified away by investing in both Farmer Bros 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 Farmer Bros and Kraft Heinz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmer Bros Co and Kraft Heinz Co, you can compare the effects of market volatilities on Farmer Bros 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 Farmer Bros with a short position of Kraft Heinz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and Kraft Heinz.

Diversification Opportunities for Farmer Bros and Kraft Heinz

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Farmer and Kraft is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Kraft Heinz Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Heinz and Farmer Bros 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 Farmer Bros Co 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 Farmer Bros i.e., Farmer Bros and Kraft Heinz go up and down completely randomly.

Pair Corralation between Farmer Bros and Kraft Heinz

Given the investment horizon of 90 days Farmer Bros is expected to generate 2.96 times less return on investment than Kraft Heinz. In addition to that, Farmer Bros is 4.4 times more volatile than Kraft Heinz Co. It trades about 0.02 of its total potential returns per unit of risk. Kraft Heinz Co is currently generating about 0.3 per unit of volatility. If you would invest  3,514  in Kraft Heinz Co on December 30, 2023 and sell it today you would earn a total of  176.00  from holding Kraft Heinz Co or generate 5.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Farmer Bros Co  vs.  Kraft Heinz Co

 Performance 
       Timeline  
Farmer Bros 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Farmer Bros Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Farmer Bros displayed solid returns over the last few months and may actually be approaching a breakup point.
Kraft Heinz 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 rather sound technical indicators, Kraft Heinz is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Farmer Bros and Kraft Heinz Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Farmer Bros and Kraft Heinz

The main advantage of trading using opposite Farmer Bros and Kraft Heinz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros 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 Farmer Bros Co 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.
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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