Correlation Between Informa PLC and WOLTERS KLUWER

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

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

Diversification Opportunities for Informa PLC and WOLTERS KLUWER

0.24

Correlation Coefficient

Informa PLC  WOLTERS KLUWER

Modest diversification

The 3 months correlation between Informa and WOLTERS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Informa PLC 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 Informa 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 Informa PLC 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 Informa PLC i.e., Informa PLC and WOLTERS KLUWER go up and down completely randomly.

Pair Corralation between Informa PLC and WOLTERS KLUWER

Assuming the 90 days horizon Informa PLC is expected to generate 2.03 times less return on investment than WOLTERS KLUWER. But when comparing it to its historical volatility, Informa PLC is 1.19 times less risky than WOLTERS KLUWER. It trades about 0.03 of its potential returns per unit of risk. WOLTERS KLUWER ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13,478  in WOLTERS KLUWER ADR on October 2, 2024 and sell it today you would earn a total of  2,622  from holding WOLTERS KLUWER ADR or generate 19.45% return on investment over 90 days.

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

Informa PLC  vs.  WOLTERS KLUWER ADR

Informa PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Informa PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Informa PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WOLTERS KLUWER ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WOLTERS KLUWER ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WOLTERS KLUWER may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Informa PLC and WOLTERS KLUWER

The main advantage of trading using opposite Informa PLC and WOLTERS KLUWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Informa PLC 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 Informa PLC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.