Correlation Between GM and HEINEKEN

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

By analyzing existing cross correlation between General Motors and HEINEKEN SP ADR, you can compare the effects of market volatilities on GM 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 GM with a short position of HEINEKEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and HEINEKEN.

Diversification Opportunities for GM and HEINEKEN

-0.54

Correlation Coefficient

GM  HEINEKEN

Excellent diversification

The 3 months correlation between GM and HEINEKEN is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HEINEKEN SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEINEKEN SP ADR and GM 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 General Motors 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 SP ADR has no effect on the direction of GM i.e., GM and HEINEKEN go up and down completely randomly.

Pair Corralation between GM and HEINEKEN

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the HEINEKEN. In addition to that, GM is 1.49 times more volatile than HEINEKEN SP ADR. It trades about -0.07 of its total potential returns per unit of risk. HEINEKEN SP ADR is currently generating about 0.08 per unit of volatility. If you would invest  3,380  in HEINEKEN SP ADR on December 27, 2024 and sell it today you would earn a total of  300.00  from holding HEINEKEN SP ADR or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

General Motors  vs.  HEINEKEN SP ADR

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

HEINEKEN SP ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HEINEKEN SP ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, HEINEKEN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and HEINEKEN

The main advantage of trading using opposite GM and HEINEKEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and HEINEKEN SP ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.