Correlation Between Visa and Wolters Kluwer

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

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

Diversification Opportunities for Visa and Wolters Kluwer

0.61

Correlation Coefficient

Visa  Wolters Kluwer

Poor diversification

The 3 months correlation between Visa and Wolters is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Wolters Kluwer go up and down completely randomly.

Pair Corralation between Visa and Wolters Kluwer

Taking into account the 90-day investment horizon Visa is expected to generate 1.45 times less return on investment than Wolters Kluwer. But when comparing it to its historical volatility, Visa Class A is 1.19 times less risky than Wolters Kluwer. It trades about 0.08 of its potential returns per unit of risk. Wolters Kluwer NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,447  in Wolters Kluwer NV on October 7, 2024 and sell it today you would earn a total of  6,628  from holding Wolters Kluwer NV or generate 70.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.8%
Values	Daily Returns

Visa Class A  vs.  Wolters Kluwer NV

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Wolters Kluwer NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wolters Kluwer NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wolters Kluwer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Wolters Kluwer

The main advantage of trading using opposite Visa and Wolters Kluwer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.