Correlation Between Kraft Heinz and Reliance Steel
Can any of the company-specific risk be diversified away by investing in both Kraft Heinz and Reliance Steel 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 Reliance Steel 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 Reliance Steel Aluminum, you can compare the effects of market volatilities on Kraft Heinz and Reliance Steel 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 Reliance Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and Reliance Steel.
Diversification Opportunities for Kraft Heinz and Reliance Steel
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kraft and Reliance is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum 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 Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Reliance Steel go up and down completely randomly.
Pair Corralation between Kraft Heinz and Reliance Steel
Assuming the 90 days trading horizon Kraft Heinz Co is expected to under-perform the Reliance Steel. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Heinz Co is 1.9 times less risky than Reliance Steel. The stock trades about -0.06 of its potential returns per unit of risk. The Reliance Steel Aluminum is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 26,491 in Reliance Steel Aluminum on September 1, 2024 and sell it today you would earn a total of 3,989 from holding Reliance Steel Aluminum or generate 15.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Kraft Heinz Co vs. Reliance Steel Aluminum
Performance |
| Timeline |
| Kraft Heinz |
| Reliance Steel Aluminum |
Kraft Heinz and Reliance Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kraft Heinz and Reliance Steel
The main advantage of trading using opposite Kraft Heinz and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.| Kraft Heinz vs. Danone SA | Kraft Heinz vs. Superior Plus Corp | Kraft Heinz vs. NMI Holdings | Kraft Heinz vs. Origin Agritech |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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