Correlation Between Heineken and Kirin Holdings

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

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

Diversification Opportunities for Heineken and Kirin Holdings

0.4

Correlation Coefficient

Heineken  Kirin Holdings

Very weak diversification

The 3 months correlation between Heineken and Kirin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and Kirin Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirin Holdings 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 Kirin Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirin Holdings has no effect on the direction of Heineken i.e., Heineken and Kirin Holdings go up and down completely randomly.

Pair Corralation between Heineken and Kirin Holdings

Assuming the 90 days trading horizon Heineken NV is expected to generate 1.64 times more return on investment than Kirin Holdings. However, Heineken is 1.64 times more volatile than Kirin Holdings. It trades about 0.14 of its potential returns per unit of risk. Kirin Holdings is currently generating about -0.03 per unit of risk. If you would invest  6,864  in Heineken NV on December 4, 2024 and sell it today you would earn a total of  1,212  from holding Heineken NV or generate 17.66% return on investment over 90 days.

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

Heineken NV  vs.  Kirin Holdings

Heineken NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 10 (%) 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.

Kirin Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kirin Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kirin Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heineken and Kirin Holdings

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

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