Correlation Between Boston Beer and Heineken

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

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

Diversification Opportunities for Boston Beer and Heineken

-0.83

Correlation Coefficient

Boston Beer  Heineken

Pay attention - limited upside

The 3 months correlation between Boston and Heineken is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Heineken go up and down completely randomly.

Pair Corralation between Boston Beer and Heineken

Considering the 90-day investment horizon Boston Beer is expected to generate 0.83 times more return on investment than Heineken. However, Boston Beer is 1.21 times less risky than Heineken. It trades about 0.12 of its potential returns per unit of risk. Heineken NV is currently generating about -0.18 per unit of risk. If you would invest  28,007  in Boston Beer on September 3, 2024 and sell it today you would earn a total of  3,485  from holding Boston Beer or generate 12.44% return on investment over 90 days.

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

Boston Beer  vs.  Heineken NV

Boston Beer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Boston Beer and Heineken

The main advantage of trading using opposite Boston Beer and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 Boston Beer 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.