Correlation Between GM and Heineken
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Heineken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Heineken NV, you can compare the effects of market volatilities on GM 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 GM with a short position of Heineken. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Heineken.
Diversification Opportunities for GM and Heineken
Pay attention - limited upside
The 3 months correlation between GM and Heineken is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and GM 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 General Motors 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 GM i.e., GM and Heineken go up and down completely randomly.
Pair Corralation between GM and Heineken
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.29 times more return on investment than Heineken. However, GM is 1.29 times more volatile than Heineken NV. It trades about 0.32 of its potential returns per unit of risk. Heineken NV is currently generating about -0.43 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Heineken NV
Performance |
| Timeline |
| General Motors |
| Heineken NV |
GM and Heineken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Heineken
The main advantage of trading using opposite GM and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Heineken vs. Barfresh Food Group | Heineken vs. Fbec Worldwide | Heineken vs. Flow Beverage Corp | Heineken vs. Eq Energy Drink |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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