Correlation Between Budweiser Brewing and Heineken Holding
Can any of the company-specific risk be diversified away by investing in both Budweiser Brewing 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 Budweiser Brewing and Heineken Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Budweiser Brewing and Heineken Holding NV, you can compare the effects of market volatilities on Budweiser Brewing 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 Budweiser Brewing with a short position of Heineken Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budweiser Brewing and Heineken Holding.
Diversification Opportunities for Budweiser Brewing and Heineken Holding
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Budweiser and Heineken is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Budweiser Brewing and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding and Budweiser Brewing 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 Budweiser Brewing 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 Budweiser Brewing i.e., Budweiser Brewing and Heineken Holding go up and down completely randomly.
Pair Corralation between Budweiser Brewing and Heineken Holding
Assuming the 90 days horizon Budweiser Brewing is expected to generate 3.26 times more return on investment than Heineken Holding. However, Budweiser Brewing is 3.26 times more volatile than Heineken Holding NV. It trades about 0.17 of its potential returns per unit of risk. Heineken Holding NV is currently generating about 0.07 per unit of risk. If you would invest 93.00 in Budweiser Brewing on December 16, 2024 and sell it today you would earn a total of 13.00 from holding Budweiser Brewing or generate 13.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Budweiser Brewing vs. Heineken Holding NV
Performance |
| Timeline |
| Budweiser Brewing |
| Heineken Holding |
Budweiser Brewing and Heineken Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Budweiser Brewing and Heineken Holding
The main advantage of trading using opposite Budweiser Brewing and Heineken Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budweiser Brewing 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.| Budweiser Brewing vs. Anheuser Busch InBev SANV | ||
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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