Correlation Between Sime Darby and Heineken Bhd

Can any of the company-specific risk be diversified away by investing in both Sime Darby and Heineken Bhd 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 Sime Darby and Heineken Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sime Darby Bhd and Heineken Bhd, you can compare the effects of market volatilities on Sime Darby and Heineken Bhd 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 Sime Darby with a short position of Heineken Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Heineken Bhd.

Diversification Opportunities for Sime Darby and Heineken Bhd

-0.4

Correlation Coefficient

Sime Darby  Heineken Bhd

Very good diversification

The 3 months correlation between Sime and Heineken is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Heineken Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Bhd and Sime Darby 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 Sime Darby Bhd are associated (or correlated) with Heineken Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Bhd has no effect on the direction of Sime Darby i.e., Sime Darby and Heineken Bhd go up and down completely randomly.

Pair Corralation between Sime Darby and Heineken Bhd

Assuming the 90 days trading horizon Sime Darby Bhd is expected to under-perform the Heineken Bhd. In addition to that, Sime Darby is 1.3 times more volatile than Heineken Bhd. It trades about -0.05 of its total potential returns per unit of risk. Heineken Bhd is currently generating about 0.03 per unit of volatility. If you would invest  2,270  in Heineken Bhd on September 28, 2024 and sell it today you would earn a total of  120.00  from holding Heineken Bhd or generate 5.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sime Darby Bhd  vs.  Heineken Bhd

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Heineken Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Heineken Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sime Darby and Heineken Bhd

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

The idea behind Sime Darby Bhd and Heineken Bhd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.