Correlation Between Wolters Kluwer and Pearson Plc

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

By analyzing existing cross correlation between Wolters Kluwer NV and Pearson plc, you can compare the effects of market volatilities on Wolters Kluwer and Pearson Plc 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 Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolters Kluwer and Pearson Plc.

Diversification Opportunities for Wolters Kluwer and Pearson Plc

0.56

Correlation Coefficient

Wolters Kluwer  Pearson Plc

Very weak diversification

The 3 months correlation between Wolters and Pearson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Wolters Kluwer NV and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc 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 NV are associated (or correlated) with Pearson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson plc has no effect on the direction of Wolters Kluwer i.e., Wolters Kluwer and Pearson Plc go up and down completely randomly.

Pair Corralation between Wolters Kluwer and Pearson Plc

Assuming the 90 days trading horizon Wolters Kluwer NV is expected to generate 0.87 times more return on investment than Pearson Plc. However, Wolters Kluwer NV is 1.15 times less risky than Pearson Plc. It trades about 0.16 of its potential returns per unit of risk. Pearson plc is currently generating about 0.1 per unit of risk. If you would invest  15,750  in Wolters Kluwer NV on September 28, 2024 and sell it today you would earn a total of  505.00  from holding Wolters Kluwer NV or generate 3.21% return on investment over 90 days.

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

Wolters Kluwer NV  vs.  Pearson plc

Wolters Kluwer NV

Risk-Adjusted Performance

7 of 100

Insignificant

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 fragile basic indicators, Wolters Kluwer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pearson plc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson plc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pearson Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wolters Kluwer and Pearson Plc

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

The idea behind Wolters Kluwer NV and Pearson plc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.