Correlation Between Heineken and Anheuser Busch

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

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

Diversification Opportunities for Heineken and Anheuser Busch

0.91

Correlation Coefficient

Heineken  Anheuser Busch

Almost no diversification

The 3 months correlation between Heineken and Anheuser is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Heineken i.e., Heineken and Anheuser Busch go up and down completely randomly.

Pair Corralation between Heineken and Anheuser Busch

Assuming the 90 days horizon Heineken NV is expected to under-perform the Anheuser Busch. In addition to that, Heineken is 1.64 times more volatile than Anheuser Busch Inbev. It trades about -0.15 of its total potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.23 per unit of volatility. If you would invest  6,475  in Anheuser Busch Inbev on September 16, 2024 and sell it today you would lose (1,132) from holding Anheuser Busch Inbev or give up 17.48% of portfolio value over 90 days.

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

Heineken NV  vs.  Anheuser Busch Inbev

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. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Heineken and Anheuser Busch

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

The idea behind Heineken NV and Anheuser Busch Inbev 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.