Correlation Between Thomson Reuters and Wolters Kluwer

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

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

Diversification Opportunities for Thomson Reuters and Wolters Kluwer

0.76

Correlation Coefficient

Thomson Reuters  Wolters Kluwer

Poor diversification

The 3 months correlation between Thomson and Wolters is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp 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 Thomson Reuters 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 Thomson Reuters Corp 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 Thomson Reuters i.e., Thomson Reuters and Wolters Kluwer go up and down completely randomly.

Pair Corralation between Thomson Reuters and Wolters Kluwer

Considering the 90-day investment horizon Thomson Reuters is expected to generate 2.29 times less return on investment than Wolters Kluwer. But when comparing it to its historical volatility, Thomson Reuters Corp is 1.21 times less risky than Wolters Kluwer. It trades about 0.06 of its potential returns per unit of risk. Wolters Kluwer NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  16,382  in Wolters Kluwer NV on September 24, 2024 and sell it today you would earn a total of  357.00  from holding Wolters Kluwer NV or generate 2.18% return on investment over 90 days.

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

Thomson Reuters Corp  vs.  Wolters Kluwer NV

Thomson Reuters Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thomson Reuters Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Thomson Reuters is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Wolters Kluwer NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wolters Kluwer NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Wolters Kluwer is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thomson Reuters and Wolters Kluwer

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

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.