Correlation Between Nestle SA and Kraft Heinz

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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

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nestle and Kraft is 0.73. 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. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.02 times less risky than Kraft Heinz. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Kraft Heinz Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,690  in Kraft Heinz Co on December 30, 2023 and sell it today you would earn a total of  0.00  from holding Kraft Heinz Co or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nestle SA  vs.  Kraft Heinz Co

 Performance 
       Timeline  
Nestle SA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
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.

Nestle SA and Kraft Heinz Volatility Contrast

   Predicted Return Density   
       Returns  

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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