Correlation Between Bank Negara and Heineken Holding
Can any of the company-specific risk be diversified away by investing in both Bank Negara 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 Bank Negara and Heineken Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Heineken Holding NV, you can compare the effects of market volatilities on Bank Negara 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 Bank Negara with a short position of Heineken Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Heineken Holding.
Diversification Opportunities for Bank Negara and Heineken Holding
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Heineken is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding and Bank Negara 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 Bank Negara Indonesia 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 Bank Negara i.e., Bank Negara and Heineken Holding go up and down completely randomly.
Pair Corralation between Bank Negara and Heineken Holding
Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 2.59 times more return on investment than Heineken Holding. However, Bank Negara is 2.59 times more volatile than Heineken Holding NV. It trades about 0.03 of its potential returns per unit of risk. Heineken Holding NV is currently generating about -0.02 per unit of risk. If you would invest 1,444 in Bank Negara Indonesia on October 7, 2024 and sell it today you would earn a total of 43.00 from holding Bank Negara Indonesia or generate 2.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.89% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Heineken Holding NV
Performance |
| Timeline |
| Bank Negara Indonesia |
| Heineken Holding |
Bank Negara and Heineken Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Heineken Holding
The main advantage of trading using opposite Bank Negara and Heineken Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara 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.| Bank Negara vs. Eurobank Ergasias Services | Bank Negara vs. Nedbank Group | Bank Negara vs. Standard Bank Group | Bank Negara vs. Bank Central Asia |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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