Correlation Between Kraft Heinz and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Kraft Heinz and Lamb Weston 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 Lamb Weston 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 Lamb Weston Holdings, you can compare the effects of market volatilities on Kraft Heinz and Lamb Weston 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 Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and Lamb Weston.
Diversification Opportunities for Kraft Heinz and Lamb Weston
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kraft and Lamb is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Lamb Weston go up and down completely randomly.
Pair Corralation between Kraft Heinz and Lamb Weston
Considering the 90-day investment horizon Kraft Heinz Co is expected to generate 0.17 times more return on investment than Lamb Weston. However, Kraft Heinz Co is 5.73 times less risky than Lamb Weston. It trades about 0.3 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.18 per unit of risk. If you would invest 3,618 in Kraft Heinz Co on January 25, 2024 and sell it today you would earn a total of 189.00 from holding Kraft Heinz Co or generate 5.22% 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. Lamb Weston Holdings
Performance |
| Timeline |
| Kraft Heinz |
| Lamb Weston Holdings |
Kraft Heinz and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kraft Heinz and Lamb Weston
The main advantage of trading using opposite Kraft Heinz and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.The idea behind Kraft Heinz Co and Lamb Weston Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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