Correlation Between Heineken and Sipp Industries

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

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

Diversification Opportunities for Heineken and Sipp Industries

-0.11

Correlation Coefficient

Heineken  Sipp Industries

Good diversification

The 3 months correlation between Heineken and Sipp is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and Sipp Industries New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sipp Industries New 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 Sipp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sipp Industries New has no effect on the direction of Heineken i.e., Heineken and Sipp Industries go up and down completely randomly.

Pair Corralation between Heineken and Sipp Industries

Assuming the 90 days horizon Heineken is expected to generate 9.74 times less return on investment than Sipp Industries. But when comparing it to its historical volatility, Heineken NV is 8.46 times less risky than Sipp Industries. It trades about 0.11 of its potential returns per unit of risk. Sipp Industries New is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Sipp Industries New on December 29, 2024 and sell it today you would earn a total of  0.06  from holding Sipp Industries New or generate 75.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Heineken NV  vs.  Sipp Industries New

Heineken NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 9 (%) 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.

Sipp Industries New

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sipp Industries New are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sipp Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heineken and Sipp Industries

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

The idea behind Heineken NV and Sipp Industries New 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.