Correlation Between Palo Alto and HEINEKEN

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

Diversification Opportunities for Palo Alto and HEINEKEN

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Palo Alto and HEINEKEN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and HEINEKEN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEINEKEN NV and Palo Alto 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 Palo Alto Networks are associated (or correlated) with HEINEKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEINEKEN NV has no effect on the direction of Palo Alto i.e., Palo Alto and HEINEKEN go up and down completely randomly.

Pair Corralation between Palo Alto and HEINEKEN

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 1.25 times more return on investment than HEINEKEN. However, Palo Alto is 1.25 times more volatile than HEINEKEN NV. It trades about 0.05 of its potential returns per unit of risk. HEINEKEN NV is currently generating about 0.0 per unit of risk. If you would invest  10,072  in Palo Alto Networks on August 31, 2022 and sell it today you would earn a total of  6,979  from holding Palo Alto Networks or generate 69.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Palo Alto Networks  vs.  HEINEKEN NV

 Performance (%) 
       Timeline  
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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Palo Alto Price Channel

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

HEINEKEN Price Channel

Palo Alto and HEINEKEN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palo Alto and HEINEKEN

The main advantage of trading using opposite Palo Alto and HEINEKEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palo Alto position performs unexpectedly, HEINEKEN 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 will offset losses from the drop in HEINEKEN's long position.
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The idea behind Palo Alto Networks and HEINEKEN 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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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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