Correlation Between Heineken Holding and Pernod Ricard

Can any of the company-specific risk be diversified away by investing in both Heineken Holding and Pernod Ricard 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 Pernod Ricard 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 Pernod Ricard SA, you can compare the effects of market volatilities on Heineken Holding and Pernod Ricard 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 Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heineken Holding and Pernod Ricard.

Diversification Opportunities for Heineken Holding and Pernod Ricard

0.85

Correlation Coefficient

Heineken Holding  Pernod Ricard

Very poor diversification

The 3 months correlation between Heineken and Pernod is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Pernod Ricard SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pernod Ricard SA 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 Pernod Ricard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pernod Ricard SA has no effect on the direction of Heineken Holding i.e., Heineken Holding and Pernod Ricard go up and down completely randomly.

Pair Corralation between Heineken Holding and Pernod Ricard

Assuming the 90 days horizon Heineken Holding NV is expected to generate 0.66 times more return on investment than Pernod Ricard. However, Heineken Holding NV is 1.51 times less risky than Pernod Ricard. It trades about -0.01 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.01 per unit of risk. If you would invest  5,918  in Heineken Holding NV on October 26, 2024 and sell it today you would lose (64.00) from holding Heineken Holding NV or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Heineken Holding NV  vs.  Pernod Ricard SA

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.

Pernod Ricard SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pernod Ricard SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Heineken Holding and Pernod Ricard

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

The idea behind Heineken Holding NV and Pernod Ricard SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.