Correlation Between Wolters Kluwer and Sodexo PK

Can any of the company-specific risk be diversified away by investing in both Wolters Kluwer and Sodexo PK 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 Sodexo PK 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 Sodexo PK, you can compare the effects of market volatilities on Wolters Kluwer and Sodexo PK 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 Sodexo PK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolters Kluwer and Sodexo PK.

Diversification Opportunities for Wolters Kluwer and Sodexo PK

0.21

Correlation Coefficient

Wolters Kluwer  Sodexo PK

Modest diversification

The 3 months correlation between Wolters and Sodexo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wolters Kluwer NV and Sodexo PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sodexo PK 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 Sodexo PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sodexo PK has no effect on the direction of Wolters Kluwer i.e., Wolters Kluwer and Sodexo PK go up and down completely randomly.

Pair Corralation between Wolters Kluwer and Sodexo PK

Assuming the 90 days horizon Wolters Kluwer NV is expected to generate 0.71 times more return on investment than Sodexo PK. However, Wolters Kluwer NV is 1.4 times less risky than Sodexo PK. It trades about 0.06 of its potential returns per unit of risk. Sodexo PK is currently generating about 0.01 per unit of risk. If you would invest  14,903  in Wolters Kluwer NV on September 24, 2024 and sell it today you would earn a total of  1,836  from holding Wolters Kluwer NV or generate 12.32% return on investment over 90 days.

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

Wolters Kluwer NV  vs.  Sodexo PK

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.

Sodexo PK

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wolters Kluwer and Sodexo PK

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

The idea behind Wolters Kluwer NV and Sodexo PK 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.