Correlation Between Heineken and Carlsberg A/S

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

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

Diversification Opportunities for Heineken and Carlsberg A/S

0.92

Correlation Coefficient

Heineken  Carlsberg A/S

Almost no diversification

The 3 months correlation between Heineken and Carlsberg is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg A/S 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 Carlsberg A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg A/S has no effect on the direction of Heineken i.e., Heineken and Carlsberg A/S go up and down completely randomly.

Pair Corralation between Heineken and Carlsberg A/S

Assuming the 90 days horizon Heineken is expected to generate 1.77 times less return on investment than Carlsberg A/S. In addition to that, Heineken is 1.0 times more volatile than Carlsberg AS. It trades about 0.11 of its total potential returns per unit of risk. Carlsberg AS is currently generating about 0.2 per unit of volatility. If you would invest  9,315  in Carlsberg AS on December 30, 2024 and sell it today you would earn a total of  3,115  from holding Carlsberg AS or generate 33.44% return on investment over 90 days.

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

Heineken NV  vs.  Carlsberg AS

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. Despite nearly fragile forward-looking signals, Heineken reported solid returns over the last few months and may actually be approaching a breakup point.

Carlsberg A/S

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Carlsberg A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heineken and Carlsberg A/S

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

The idea behind Heineken NV and Carlsberg AS 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..