Correlation Between Heineken and China Resources
Can any of the company-specific risk be diversified away by investing in both Heineken and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heineken NV and China Resources Beer, you can compare the effects of market volatilities on Heineken and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heineken and China Resources.
Diversification Opportunities for Heineken and China Resources
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Heineken and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Heineken NV and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 NV are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Heineken i.e., Heineken and China Resources go up and down completely randomly.
Pair Corralation between Heineken and China Resources
Assuming the 90 days horizon Heineken NV is expected to generate 0.86 times more return on investment than China Resources. However, Heineken NV is 1.16 times less risky than China Resources. It trades about -0.01 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.04 per unit of risk. If you would invest 9,385 in Heineken NV on August 28, 2024 and sell it today you would lose (1,960) from holding Heineken NV or give up 20.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.66% |
| Values | Daily Returns |
Heineken NV vs. China Resources Beer
Performance |
| Timeline |
| Heineken NV |
| China Resources Beer |
Heineken and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heineken and China Resources
The main advantage of trading using opposite Heineken and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heineken position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Heineken vs. Anheuser Busch InBev SANV | Heineken vs. Carlsberg AS | Heineken vs. Molson Coors Brewing | Heineken vs. Compania Cervecerias Unidas |
| China Resources vs. Budweiser Brewing | China Resources vs. Anheuser Busch InBev SANV | China Resources vs. Anheuser Busch Inbev | China Resources vs. Molson Coors Brewing |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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