Correlation Between Heineken and Danone PK

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

By analyzing existing cross correlation between Heineken NV and Danone PK, you can compare the effects of market volatilities on Heineken and Danone PK 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 Danone PK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heineken and Danone PK.

Diversification Opportunities for Heineken and Danone PK

0.0

Correlation Coefficient

Heineken  Danone PK

Pay attention - limited upside

The 3 months correlation between Heineken and Danone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and Danone PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone PK 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 Danone PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone PK has no effect on the direction of Heineken i.e., Heineken and Danone PK go up and down completely randomly.

Pair Corralation between Heineken and Danone PK

If you would invest  3,547  in Heineken NV on December 30, 2024 and sell it today you would earn a total of  548.00  from holding Heineken NV or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Heineken NV  vs.  Danone PK

Heineken NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 8 (%) 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.

Danone PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danone PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Danone PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heineken and Danone PK

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

The idea behind Heineken NV and Danone PK 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.