Correlation Between Heineken Holding and Budweiser Brewing
Can any of the company-specific risk be diversified away by investing in both Heineken Holding and Budweiser Brewing 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 Holding and Budweiser Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heineken Holding NV and Budweiser Brewing, you can compare the effects of market volatilities on Heineken Holding and Budweiser Brewing 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 Holding with a short position of Budweiser Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heineken Holding and Budweiser Brewing.
Diversification Opportunities for Heineken Holding and Budweiser Brewing
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Heineken and Budweiser is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Budweiser Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budweiser Brewing and Heineken Holding 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 Holding NV are associated (or correlated) with Budweiser Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budweiser Brewing has no effect on the direction of Heineken Holding i.e., Heineken Holding and Budweiser Brewing go up and down completely randomly.
Pair Corralation between Heineken Holding and Budweiser Brewing
Assuming the 90 days horizon Heineken Holding is expected to generate 8.25 times less return on investment than Budweiser Brewing. But when comparing it to its historical volatility, Heineken Holding NV is 3.26 times less risky than Budweiser Brewing. It trades about 0.07 of its potential returns per unit of risk. Budweiser Brewing is currently generating about 0.17 of returns per unit of risk over similar time horizon. 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 |
Heineken Holding NV vs. Budweiser Brewing
Performance |
| Timeline |
| Heineken Holding |
| Budweiser Brewing |
Heineken Holding and Budweiser Brewing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heineken Holding and Budweiser Brewing
The main advantage of trading using opposite Heineken Holding and Budweiser Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heineken Holding position performs unexpectedly, Budweiser Brewing 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 Budweiser Brewing will offset losses from the drop in Budweiser Brewing's long position.| Heineken Holding vs. Heineken NV | ||
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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