Correlation Between WOLTERS KLUWER and GungHo Online

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

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

Diversification Opportunities for WOLTERS KLUWER and GungHo Online

0.31

Correlation Coefficient

WOLTERS KLUWER  GungHo Online

Weak diversification

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

Pair Corralation between WOLTERS KLUWER and GungHo Online

Assuming the 90 days horizon WOLTERS KLUWER ADR is expected to generate 0.56 times more return on investment than GungHo Online. However, WOLTERS KLUWER ADR is 1.77 times less risky than GungHo Online. It trades about 0.27 of its potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.05 per unit of risk. If you would invest  16,000  in WOLTERS KLUWER ADR on October 23, 2024 and sell it today you would earn a total of  1,100  from holding WOLTERS KLUWER ADR or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

WOLTERS KLUWER ADR  vs.  GungHo Online Entertainment

WOLTERS KLUWER ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WOLTERS KLUWER ADR are ranked lower than 7 (%) 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 February 2025.

GungHo Online Entert

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WOLTERS KLUWER and GungHo Online

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

The idea behind WOLTERS KLUWER ADR and GungHo Online Entertainment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.