Correlation Between WOLTERS KLUWER and GOME Retail
Can any of the company-specific risk be diversified away by investing in both WOLTERS KLUWER and GOME Retail 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 GOME Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WOLTERS KLUWER ADR and GOME Retail Holdings, you can compare the effects of market volatilities on WOLTERS KLUWER and GOME Retail 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 GOME Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOLTERS KLUWER and GOME Retail.
Diversification Opportunities for WOLTERS KLUWER and GOME Retail
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WOLTERS and GOME is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding WOLTERS KLUWER ADR and GOME Retail Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOME Retail Holdings 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 ADR are associated (or correlated) with GOME Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOME Retail Holdings has no effect on the direction of WOLTERS KLUWER i.e., WOLTERS KLUWER and GOME Retail go up and down completely randomly.
Pair Corralation between WOLTERS KLUWER and GOME Retail
Assuming the 90 days horizon WOLTERS KLUWER is expected to generate 3.45 times less return on investment than GOME Retail. But when comparing it to its historical volatility, WOLTERS KLUWER ADR is 7.34 times less risky than GOME Retail. It trades about 0.06 of its potential returns per unit of risk. GOME Retail Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.20 in GOME Retail Holdings on November 7, 2024 and sell it today you would lose (0.10) from holding GOME Retail Holdings or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
WOLTERS KLUWER ADR vs. GOME Retail Holdings
Performance |
| Timeline |
| WOLTERS KLUWER ADR |
| GOME Retail Holdings |
WOLTERS KLUWER and GOME Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WOLTERS KLUWER and GOME Retail
The main advantage of trading using opposite WOLTERS KLUWER and GOME Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WOLTERS KLUWER position performs unexpectedly, GOME Retail 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 GOME Retail will offset losses from the drop in GOME Retail's long position.| WOLTERS KLUWER vs. Federal Agricultural Mortgage | WOLTERS KLUWER vs. Daito Trust Construction | WOLTERS KLUWER vs. Guangdong Investment Limited | WOLTERS KLUWER vs. China Railway Construction |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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