Correlation Between Compania Cervecerias and Heineken

Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias 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 Compania Cervecerias and Heineken into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compania Cervecerias Unidas and Heineken NV, you can compare the effects of market volatilities on Compania Cervecerias 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 Compania Cervecerias with a short position of Heineken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and Heineken.

Diversification Opportunities for Compania Cervecerias and Heineken

0.3

Correlation Coefficient

Compania Cervecerias  Heineken

Weak diversification

The 3 months correlation between Compania and Heineken is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and Compania Cervecerias 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 Compania Cervecerias Unidas 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 Compania Cervecerias i.e., Compania Cervecerias and Heineken go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Heineken

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 2.07 times more return on investment than Heineken. However, Compania Cervecerias is 2.07 times more volatile than Heineken NV. It trades about 0.15 of its potential returns per unit of risk. Heineken NV is currently generating about 0.15 per unit of risk. If you would invest  1,207  in Compania Cervecerias Unidas on February 7, 2024 and sell it today you would earn a total of  76.00  from holding Compania Cervecerias Unidas or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  Heineken NV

Compania Cervecerias

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Compania Cervecerias may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Heineken NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Heineken is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania Cervecerias and Heineken

The main advantage of trading using opposite Compania Cervecerias and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias 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 Compania Cervecerias Unidas 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .