Correlation Between Heineken Holding and Relx PLC

Can any of the company-specific risk be diversified away by investing in both Heineken Holding and Relx PLC 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 Relx PLC 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 Relx PLC, you can compare the effects of market volatilities on Heineken Holding and Relx PLC 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 Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heineken Holding and Relx PLC.

Diversification Opportunities for Heineken Holding and Relx PLC

-0.59

Correlation Coefficient

Heineken Holding  Relx PLC

Excellent diversification

The 3 months correlation between Heineken and Relx is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Heineken Holding NV and Relx PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC has no effect on the direction of Heineken Holding i.e., Heineken Holding and Relx PLC go up and down completely randomly.

Pair Corralation between Heineken Holding and Relx PLC

Assuming the 90 days trading horizon Heineken Holding NV is expected to generate 1.0 times more return on investment than Relx PLC. However, Heineken Holding NV is 1.0 times less risky than Relx PLC. It trades about 0.17 of its potential returns per unit of risk. Relx PLC is currently generating about -0.08 per unit of risk. If you would invest  7,314  in Heineken Holding NV on January 31, 2024 and sell it today you would earn a total of  241.00  from holding Heineken Holding NV or generate 3.3% return on investment over 90 days.

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

Heineken Holding NV  vs.  Relx PLC

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 comparatively stable basic indicators, Heineken Holding is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Relx PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Relx PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Heineken Holding and Relx PLC

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

The idea behind Heineken Holding NV and Relx PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.