Correlation Between Heineken and Carsales

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

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

Diversification Opportunities for Heineken and Carsales

-0.65

Correlation Coefficient

Heineken  Carsales

Excellent diversification

The 3 months correlation between Heineken and Carsales is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Heineken i.e., Heineken and Carsales go up and down completely randomly.

Pair Corralation between Heineken and Carsales

Assuming the 90 days trading horizon Heineken NV is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Heineken NV is 1.14 times less risky than Carsales. The stock trades about -0.16 of its potential returns per unit of risk. The CarsalesCom is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,260  in CarsalesCom on October 5, 2024 and sell it today you would lose (80.00) from holding CarsalesCom or give up 3.54% of portfolio value over 90 days.

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

Heineken NV  vs.  CarsalesCom

Heineken NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carsales 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 Carsales

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

The idea behind Heineken NV and CarsalesCom 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.