Correlation Between Heineken Holding and Boston Beer

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

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

Diversification Opportunities for Heineken Holding and Boston Beer

-0.87

Correlation Coefficient

Heineken Holding  Boston Beer

Pay attention - limited upside

The 3 months correlation between Heineken and Boston is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and Heineken Holding 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 Heineken Holding NV are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Heineken Holding i.e., Heineken Holding and Boston Beer go up and down completely randomly.

Pair Corralation between Heineken Holding and Boston Beer

Assuming the 90 days horizon Heineken Holding NV is expected to under-perform the Boston Beer. But the stock apears to be less risky and, when comparing its historical volatility, Heineken Holding NV is 1.47 times less risky than Boston Beer. The stock trades about -0.17 of its potential returns per unit of risk. The The Boston Beer is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  25,280  in The Boston Beer on September 3, 2024 and sell it today you would earn a total of  4,400  from holding The Boston Beer or generate 17.41% return on investment over 90 days.

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

Heineken Holding NV  vs.  The Boston Beer

Heineken Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Boston Beer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Boston Beer are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Boston Beer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heineken Holding and Boston Beer

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

The idea behind Heineken Holding NV and The Boston Beer 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.