Correlation Between Suntory Beverage and Heineken

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

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

Diversification Opportunities for Suntory Beverage and Heineken

0.7

Correlation Coefficient

Suntory Beverage  Heineken

Poor diversification

The 3 months correlation between Suntory and Heineken is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV and Suntory Beverage 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 Suntory Beverage Food 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 Suntory Beverage i.e., Suntory Beverage and Heineken go up and down completely randomly.

Pair Corralation between Suntory Beverage and Heineken

Assuming the 90 days horizon Suntory Beverage Food is expected to generate 1.05 times more return on investment than Heineken. However, Suntory Beverage is 1.05 times more volatile than Heineken NV. It trades about 0.12 of its potential returns per unit of risk. Heineken NV is currently generating about 0.07 per unit of risk. If you would invest  1,597  in Suntory Beverage Food on March 14, 2024 and sell it today you would earn a total of  186.00  from holding Suntory Beverage Food or generate 11.65% return on investment over 90 days.

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

Suntory Beverage Food  vs.  Heineken NV

Suntory Beverage Food

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suntory Beverage Food are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Suntory Beverage may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Heineken NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Heineken may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Suntory Beverage and Heineken

The main advantage of trading using opposite Suntory Beverage and Heineken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suntory Beverage 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 Suntory Beverage Food 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.