Correlation Between Kraft Heinz and Indofood CBP

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

Diversification Opportunities for Kraft Heinz and Indofood CBP

-0.68

Correlation Coefficient

Kraft Heinz  Indofood CBP

Excellent diversification

The 3 months correlation between Kraft and Indofood is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Indofood CBP Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood CBP Sukses 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 Indofood CBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood CBP Sukses has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Indofood CBP go up and down completely randomly.

Pair Corralation between Kraft Heinz and Indofood CBP

Considering the 90-day investment horizon Kraft Heinz Co is expected to under-perform the Indofood CBP. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 2.63 times less risky than Indofood CBP. The stock trades about -0.13 of its potential returns per unit of risk. The Indofood CBP Sukses is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,233  in Indofood CBP Sukses on September 12, 2024 and sell it today you would earn a total of  147.00  from holding Indofood CBP Sukses or generate 11.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Kraft Heinz Co  vs.  Indofood CBP Sukses

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.

Indofood CBP Sukses

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood CBP Sukses are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Indofood CBP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kraft Heinz and Indofood CBP

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

The idea behind Kraft Heinz Co and Indofood CBP Sukses 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.