Correlation Between Wolters Kluwer and Thomson Reuters

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

Diversification Opportunities for Wolters Kluwer and Thomson Reuters

0.76

Correlation Coefficient

Wolters Kluwer  Thomson Reuters

Poor diversification

The 3 months correlation between Wolters and Thomson is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Wolters Kluwer NV and Thomson Reuters Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters Corp 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters Corp has no effect on the direction of Wolters Kluwer i.e., Wolters Kluwer and Thomson Reuters go up and down completely randomly.

Pair Corralation between Wolters Kluwer and Thomson Reuters

Assuming the 90 days horizon Wolters Kluwer NV is expected to generate 1.21 times more return on investment than Thomson Reuters. However, Wolters Kluwer is 1.21 times more volatile than Thomson Reuters Corp. It trades about 0.11 of its potential returns per unit of risk. Thomson Reuters Corp is currently generating about 0.06 per unit of risk. 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

Wolters Kluwer NV  vs.  Thomson Reuters Corp

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.

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.

Pair Trading with Wolters Kluwer and Thomson Reuters

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

The idea behind Wolters Kluwer NV and Thomson Reuters Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.