Correlation Between SWISS WATER and WOLTERS KLUWER

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and WOLTERS KLUWER 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 SWISS WATER and WOLTERS KLUWER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and WOLTERS KLUWER ADR, you can compare the effects of market volatilities on SWISS WATER and WOLTERS KLUWER 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 SWISS WATER with a short position of WOLTERS KLUWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and WOLTERS KLUWER.

Diversification Opportunities for SWISS WATER and WOLTERS KLUWER

0.31

Correlation Coefficient

SWISS WATER  WOLTERS KLUWER

Weak diversification

The 3 months correlation between SWISS and WOLTERS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and WOLTERS KLUWER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOLTERS KLUWER ADR and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with WOLTERS KLUWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOLTERS KLUWER ADR has no effect on the direction of SWISS WATER i.e., SWISS WATER and WOLTERS KLUWER go up and down completely randomly.

Pair Corralation between SWISS WATER and WOLTERS KLUWER

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the WOLTERS KLUWER. In addition to that, SWISS WATER is 1.69 times more volatile than WOLTERS KLUWER ADR. It trades about -0.08 of its total potential returns per unit of risk. WOLTERS KLUWER ADR is currently generating about -0.09 per unit of volatility. If you would invest  16,000  in WOLTERS KLUWER ADR on December 22, 2024 and sell it today you would lose (1,700) from holding WOLTERS KLUWER ADR or give up 10.62% of portfolio value over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  WOLTERS KLUWER ADR

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

Very Weak

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

WOLTERS KLUWER ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days WOLTERS KLUWER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SWISS WATER and WOLTERS KLUWER

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

The idea behind SWISS WATER DECAFFCOFFEE and WOLTERS KLUWER ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.