Correlation Between BNP Paribas and Heineken

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

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

Diversification Opportunities for BNP Paribas and Heineken

0.85

Correlation Coefficient

BNP Paribas  Heineken

Very poor diversification

The 3 months correlation between BNP and Heineken is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BNP Paribas SA and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and BNP Paribas 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 BNP Paribas SA are associated (or correlated) with Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of BNP Paribas i.e., BNP Paribas and Heineken go up and down completely randomly.

Pair Corralation between BNP Paribas and Heineken

Assuming the 90 days horizon BNP Paribas SA is expected to generate 0.69 times more return on investment than Heineken. However, BNP Paribas SA is 1.44 times less risky than Heineken. It trades about 0.41 of its potential returns per unit of risk. Heineken NV is currently generating about 0.14 per unit of risk. If you would invest  2,997  in BNP Paribas SA on December 20, 2024 and sell it today you would earn a total of  1,418  from holding BNP Paribas SA or generate 47.31% return on investment over 90 days.

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

BNP Paribas SA  vs.  Heineken NV

BNP Paribas SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BNP Paribas SA are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BNP Paribas showed solid returns over the last few months and may actually be approaching a breakup point.

Heineken NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Heineken showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BNP Paribas and Heineken

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

The idea behind BNP Paribas SA and Heineken NV 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..