Correlation Between HEINEKEN and Heineken Holding

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

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

Diversification Opportunities for HEINEKEN and Heineken Holding

0.94

Correlation Coefficient

HEINEKEN  Heineken Holding

Almost no diversification

The 3 months correlation between HEINEKEN and Heineken is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding HEINEKEN SP ADR and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding 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 SP ADR are associated (or correlated) with Heineken Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Holding has no effect on the direction of HEINEKEN i.e., HEINEKEN and Heineken Holding go up and down completely randomly.

Pair Corralation between HEINEKEN and Heineken Holding

Assuming the 90 days trading horizon HEINEKEN is expected to generate 1.57 times less return on investment than Heineken Holding. But when comparing it to its historical volatility, HEINEKEN SP ADR is 1.14 times less risky than Heineken Holding. It trades about 0.08 of its potential returns per unit of risk. Heineken Holding NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,785  in Heineken Holding NV on December 30, 2024 and sell it today you would earn a total of  790.00  from holding Heineken Holding NV or generate 13.66% return on investment over 90 days.

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

HEINEKEN SP ADR  vs.  Heineken Holding NV

HEINEKEN SP ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HEINEKEN SP ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, HEINEKEN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Heineken Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken Holding NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Heineken Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEINEKEN and Heineken Holding

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

The idea behind HEINEKEN SP ADR and Heineken Holding NV 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 Global Correlations module to find global opportunities by holding instruments from different markets.