Correlation Between Wolters Kluwer and Global Payments

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

Diversification Opportunities for Wolters Kluwer and Global Payments

-0.32

Correlation Coefficient

Wolters Kluwer  Global Payments

Very good diversification

The 3 months correlation between Wolters and Global is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wolters Kluwer NV and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Wolters Kluwer i.e., Wolters Kluwer and Global Payments go up and down completely randomly.

Pair Corralation between Wolters Kluwer and Global Payments

Assuming the 90 days horizon Wolters Kluwer NV is expected to under-perform the Global Payments. But the pink sheet apears to be less risky and, when comparing its historical volatility, Wolters Kluwer NV is 1.53 times less risky than Global Payments. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Global Payments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,074  in Global Payments on September 23, 2024 and sell it today you would earn a total of  129.00  from holding Global Payments or generate 1.16% return on investment over 90 days.

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

Wolters Kluwer NV  vs.  Global Payments

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.

Global Payments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global Payments is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wolters Kluwer and Global Payments

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

The idea behind Wolters Kluwer NV and Global Payments 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.