Correlation Between Associated British and Wolters Kluwer

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

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

Diversification Opportunities for Associated British and Wolters Kluwer

0.49

Correlation Coefficient

Associated British  Wolters Kluwer

Very weak diversification

The 3 months correlation between Associated and Wolters is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Wolters Kluwer go up and down completely randomly.

Pair Corralation between Associated British and Wolters Kluwer

Assuming the 90 days horizon Associated British Foods is expected to under-perform the Wolters Kluwer. In addition to that, Associated British is 1.27 times more volatile than Wolters Kluwer NV. It trades about -0.11 of its total potential returns per unit of risk. Wolters Kluwer NV is currently generating about -0.01 per unit of volatility. If you would invest  16,898  in Wolters Kluwer NV on September 3, 2024 and sell it today you would lose (214.00) from holding Wolters Kluwer NV or give up 1.27% of portfolio value over 90 days.

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

Associated British Foods  vs.  Wolters Kluwer NV

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Associated British and Wolters Kluwer

The main advantage of trading using opposite Associated British and Wolters Kluwer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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 Associated British Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.