Correlation Between HEINEKEN and Palo Alto

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Can any of the company-specific risk be diversified away by investing in both HEINEKEN and Palo Alto 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 and Palo Alto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HEINEKEN NV and Palo Alto Networks, you can compare the effects of market volatilities on HEINEKEN and Palo Alto 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 with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEINEKEN and Palo Alto.

Diversification Opportunities for HEINEKEN and Palo Alto

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between HEINEKEN and Palo Alto is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HEINEKEN NV and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and HEINEKEN 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 NV are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of HEINEKEN i.e., HEINEKEN and Palo Alto go up and down completely randomly.

Pair Corralation between HEINEKEN and Palo Alto

Assuming the 90 days horizon HEINEKEN NV is expected to generate 0.45 times more return on investment than Palo Alto. However, HEINEKEN NV is 2.22 times less risky than Palo Alto. It trades about 0.35 of its potential returns per unit of risk. Palo Alto Networks is currently generating about 0.02 per unit of risk. If you would invest  8,231  in HEINEKEN NV on August 30, 2022 and sell it today you would earn a total of  1,059  from holding HEINEKEN NV or generate 12.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HEINEKEN NV  vs.  Palo Alto Networks

 Performance (%) 
       Timeline  
HEINEKEN NV 
HEINEKEN Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in HEINEKEN NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, HEINEKEN is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

HEINEKEN Price Channel

Palo Alto Networks 
Palo Alto Performance
0 of 100
Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palo Alto is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Palo Alto Price Channel

HEINEKEN and Palo Alto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HEINEKEN and Palo Alto

The main advantage of trading using opposite HEINEKEN and Palo Alto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEINEKEN position performs unexpectedly, Palo Alto 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 Palo Alto will offset losses from the drop in Palo Alto's long position.
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The idea behind HEINEKEN NV and Palo Alto Networks 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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Check out your portfolio center. 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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