Correlation Between Heineken Bhd and Sime Darby

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

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

Diversification Opportunities for Heineken Bhd and Sime Darby

-0.34

Correlation Coefficient

Heineken Bhd  Sime Darby

Very good diversification

The 3 months correlation between Heineken and Sime is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Bhd and Sime Darby Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sime Darby Bhd and Heineken Bhd 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 Bhd are associated (or correlated) with Sime Darby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sime Darby Bhd has no effect on the direction of Heineken Bhd i.e., Heineken Bhd and Sime Darby go up and down completely randomly.

Pair Corralation between Heineken Bhd and Sime Darby

Assuming the 90 days trading horizon Heineken Bhd is expected to generate 0.34 times more return on investment than Sime Darby. However, Heineken Bhd is 2.92 times less risky than Sime Darby. It trades about 0.13 of its potential returns per unit of risk. Sime Darby Bhd is currently generating about 0.05 per unit of risk. If you would invest  2,372  in Heineken Bhd on September 24, 2024 and sell it today you would earn a total of  38.00  from holding Heineken Bhd or generate 1.6% return on investment over 90 days.

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

Heineken Bhd  vs.  Sime Darby Bhd

Heineken Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heineken Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Heineken Bhd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sime Darby Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sime Darby Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sime Darby is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Heineken Bhd and Sime Darby

The main advantage of trading using opposite Heineken Bhd and Sime Darby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heineken Bhd position performs unexpectedly, Sime Darby 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 Sime Darby will offset losses from the drop in Sime Darby's long position.

The idea behind Heineken Bhd and Sime Darby Bhd 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 Global Correlations module to find global opportunities by holding instruments from different markets.