Correlation Between Heineken Holding and Compania Cervecerias

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

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

Diversification Opportunities for Heineken Holding and Compania Cervecerias

-0.25

Correlation Coefficient

Heineken Holding  Compania Cervecerias

Very good diversification

The 3 months correlation between Heineken and Compania is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Heineken Holding 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 Holding NV are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Heineken Holding i.e., Heineken Holding and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Heineken Holding and Compania Cervecerias

Assuming the 90 days horizon Heineken Holding NV is expected to under-perform the Compania Cervecerias. In addition to that, Heineken Holding is 1.31 times more volatile than Compania Cervecerias Unidas. It trades about -0.02 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about -0.01 per unit of volatility. If you would invest  1,325  in Compania Cervecerias Unidas on October 7, 2024 and sell it today you would lose (203.00) from holding Compania Cervecerias Unidas or give up 15.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.89%
Values	Daily Returns

Heineken Holding NV  vs.  Compania Cervecerias Unidas

Heineken Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compania Cervecerias

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Heineken Holding and Compania Cervecerias

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

The idea behind Heineken Holding NV and Compania Cervecerias Unidas 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.