Correlation Between Koninklijke KPN and Wolters Kluwer

Can any of the company-specific risk be diversified away by investing in both Koninklijke KPN 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 Koninklijke KPN and Wolters Kluwer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Koninklijke KPN NV and Wolters Kluwer NV, you can compare the effects of market volatilities on Koninklijke KPN 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 Koninklijke KPN with a short position of Wolters Kluwer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke KPN and Wolters Kluwer.

Diversification Opportunities for Koninklijke KPN and Wolters Kluwer

-0.17

Correlation Coefficient

Koninklijke KPN  Wolters Kluwer

Good diversification

The 3 months correlation between Koninklijke and Wolters is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and Wolters Kluwer NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolters Kluwer NV and Koninklijke KPN 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 Koninklijke KPN NV 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 NV has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and Wolters Kluwer go up and down completely randomly.

Pair Corralation between Koninklijke KPN and Wolters Kluwer

Assuming the 90 days trading horizon Koninklijke KPN is expected to generate 11.14 times less return on investment than Wolters Kluwer. But when comparing it to its historical volatility, Koninklijke KPN NV is 1.28 times less risky than Wolters Kluwer. It trades about 0.04 of its potential returns per unit of risk. Wolters Kluwer NV is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  16,025  in Wolters Kluwer NV on October 20, 2024 and sell it today you would earn a total of  1,105  from holding Wolters Kluwer NV or generate 6.9% return on investment over 90 days.

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

Koninklijke KPN NV  vs.  Wolters Kluwer NV

Koninklijke KPN NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke KPN NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Koninklijke KPN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Wolters Kluwer NV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wolters Kluwer NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Wolters Kluwer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Koninklijke KPN and Wolters Kluwer

The main advantage of trading using opposite Koninklijke KPN and Wolters Kluwer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke KPN 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 Koninklijke KPN NV and Wolters Kluwer 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.

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 the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.