Correlation Between Unilever PLC and Heineken Holding

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

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

Diversification Opportunities for Unilever PLC and Heineken Holding

0.61

Correlation Coefficient

Unilever PLC  Heineken Holding

Poor diversification

The 3 months correlation between Unilever and Heineken is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding and Unilever PLC 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 Unilever PLC are associated (or correlated) with Heineken Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Holding has no effect on the direction of Unilever PLC i.e., Unilever PLC and Heineken Holding go up and down completely randomly.

Pair Corralation between Unilever PLC and Heineken Holding

Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.94 times more return on investment than Heineken Holding. However, Unilever PLC is 1.06 times less risky than Heineken Holding. It trades about -0.04 of its potential returns per unit of risk. Heineken Holding NV is currently generating about -0.22 per unit of risk. If you would invest  5,732  in Unilever PLC on September 20, 2024 and sell it today you would lose (144.00) from holding Unilever PLC or give up 2.51% of portfolio value over 90 days.

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

Unilever PLC  vs.  Heineken Holding NV

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Unilever PLC and Heineken Holding

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

The idea behind Unilever PLC and Heineken Holding 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.