Correlation Between Heineken Bhd and Pentamaster Bhd

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

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

Diversification Opportunities for Heineken Bhd and Pentamaster Bhd

0.23

Correlation Coefficient

Heineken Bhd  Pentamaster Bhd

Modest diversification

The 3 months correlation between Heineken and Pentamaster is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Bhd and Pentamaster Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentamaster 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 Pentamaster Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentamaster Bhd has no effect on the direction of Heineken Bhd i.e., Heineken Bhd and Pentamaster Bhd go up and down completely randomly.

Pair Corralation between Heineken Bhd and Pentamaster Bhd

Assuming the 90 days trading horizon Heineken Bhd is expected to generate 1.68 times less return on investment than Pentamaster Bhd. But when comparing it to its historical volatility, Heineken Bhd is 2.28 times less risky than Pentamaster Bhd. It trades about 0.12 of its potential returns per unit of risk. Pentamaster Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  358.00  in Pentamaster Bhd on September 24, 2024 and sell it today you would earn a total of  53.00  from holding Pentamaster Bhd or generate 14.8% return on investment over 90 days.

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

Heineken Bhd  vs.  Pentamaster 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.

Pentamaster Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentamaster Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pentamaster Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heineken Bhd and Pentamaster Bhd

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

The idea behind Heineken Bhd and Pentamaster 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.