Correlation Between Heineken and China Resources

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

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

Diversification Opportunities for Heineken and China Resources

0.14

Correlation Coefficient

Heineken  China Resources

Average diversification

The 3 months correlation between Heineken and China is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer and Heineken 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 NV are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Heineken i.e., Heineken and China Resources go up and down completely randomly.

Pair Corralation between Heineken and China Resources

Assuming the 90 days horizon Heineken NV is expected to generate 0.47 times more return on investment than China Resources. However, Heineken NV is 2.13 times less risky than China Resources. It trades about -0.03 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.03 per unit of risk. If you would invest  4,554  in Heineken NV on September 14, 2024 and sell it today you would lose (923.00) from holding Heineken NV or give up 20.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Heineken NV  vs.  China Resources Beer

Heineken NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Resources Beer

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, China Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heineken and China Resources

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

The idea behind Heineken NV and China Resources 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.