Correlation Between Heineken Holding and Ambev SA

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

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

Diversification Opportunities for Heineken Holding and Ambev SA

0.39

Correlation Coefficient

Heineken Holding  Ambev SA

Weak diversification

The 3 months correlation between Heineken and Ambev is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Heineken Holding 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 Holding NV are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Heineken Holding i.e., Heineken Holding and Ambev SA go up and down completely randomly.

Pair Corralation between Heineken Holding and Ambev SA

Assuming the 90 days horizon Heineken Holding NV is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, Heineken Holding NV is 2.91 times less risky than Ambev SA. The stock trades about -0.28 of its potential returns per unit of risk. The Ambev SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Ambev SA on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Ambev SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Heineken Holding NV  vs.  Ambev SA

Heineken Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Heineken Holding and Ambev SA

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

The idea behind Heineken Holding NV and Ambev SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.