Correlation Between Kraft Heinz and McCormick Company

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

Diversification Opportunities for Kraft Heinz and McCormick Company

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Kraft and McCormick is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick rporated 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 McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick rporated has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and McCormick Company go up and down completely randomly.

Pair Corralation between Kraft Heinz and McCormick Company

Considering the 90-day investment horizon Kraft Heinz Co is expected to generate 0.82 times more return on investment than McCormick Company. However, Kraft Heinz Co is 1.22 times less risky than McCormick Company. It trades about 0.0 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about -0.02 per unit of risk. If you would invest  3,783  in Kraft Heinz Co on December 30, 2023 and sell it today you would lose (93.00) from holding Kraft Heinz Co or give up 2.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kraft Heinz Co  vs.  McCormick Company Incorporated

 Performance 
       Timeline  
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.
McCormick rporated 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, McCormick Company may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Kraft Heinz and McCormick Company Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kraft Heinz and McCormick Company

The main advantage of trading using opposite Kraft Heinz and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz position performs unexpectedly, McCormick Company 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 McCormick Company will offset losses from the drop in McCormick Company's long position.
The idea behind Kraft Heinz Co and McCormick Company Incorporated 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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