Correlation Between Reckitt Benckiser and Heineken

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

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

Diversification Opportunities for Reckitt Benckiser and Heineken

0.68

Correlation Coefficient

Reckitt Benckiser  Heineken

Poor diversification

The 3 months correlation between Reckitt and Heineken is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and Reckitt Benckiser 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 Reckitt Benckiser Group are associated (or correlated) with Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Heineken go up and down completely randomly.

Pair Corralation between Reckitt Benckiser and Heineken

Assuming the 90 days horizon Reckitt Benckiser Group is expected to generate 1.09 times more return on investment than Heineken. However, Reckitt Benckiser is 1.09 times more volatile than Heineken NV. It trades about 0.01 of its potential returns per unit of risk. Heineken NV is currently generating about -0.3 per unit of risk. If you would invest  1,260  in Reckitt Benckiser Group on October 26, 2024 and sell it today you would lose (1.00) from holding Reckitt Benckiser Group or give up 0.08% of portfolio value over 90 days.

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

Reckitt Benckiser Group  vs.  Heineken NV

Reckitt Benckiser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Reckitt Benckiser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Reckitt Benckiser and Heineken

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

The idea behind Reckitt Benckiser Group and Heineken 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.