Correlation Between Kraft Heinz and Danone SA

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

Diversification Opportunities for Kraft Heinz and Danone SA

0.69

Correlation Coefficient

Kraft Heinz  Danone SA

Poor diversification

The 3 months correlation between Kraft and Danone is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Danone SA go up and down completely randomly.

Pair Corralation between Kraft Heinz and Danone SA

Considering the 90-day investment horizon Kraft Heinz Co is expected to under-perform the Danone SA. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.85 times less risky than Danone SA. The stock trades about -0.03 of its potential returns per unit of risk. The Danone SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,952  in Danone SA on September 21, 2024 and sell it today you would earn a total of  1,643  from holding Danone SA or generate 33.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.93%
Values	Daily Returns

Kraft Heinz Co  vs.  Danone SA

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.

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kraft Heinz and Danone SA

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

The idea behind Kraft Heinz Co and Danone SA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.