Correlation Between Wolters Kluwer and Coloplast

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

Diversification Opportunities for Wolters Kluwer and Coloplast

0.5

Correlation Coefficient

Wolters Kluwer  Coloplast

Very weak diversification

The 3 months correlation between Wolters and Coloplast is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wolters Kluwer NV and Coloplast A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A 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 Coloplast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A has no effect on the direction of Wolters Kluwer i.e., Wolters Kluwer and Coloplast go up and down completely randomly.

Pair Corralation between Wolters Kluwer and Coloplast

Assuming the 90 days horizon Wolters Kluwer NV is expected to generate 1.05 times more return on investment than Coloplast. However, Wolters Kluwer is 1.05 times more volatile than Coloplast A. It trades about -0.01 of its potential returns per unit of risk. Coloplast A is currently generating about -0.09 per unit of risk. 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

Wolters Kluwer NV  vs.  Coloplast A

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.

Coloplast A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloplast A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wolters Kluwer and Coloplast

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

The idea behind Wolters Kluwer NV and Coloplast A 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.