Correlation Between UPM Kymmene and Intermediate Capital
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Intermediate Capital 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 UPM Kymmene and Intermediate Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UPM Kymmene Oyj and Intermediate Capital Group, you can compare the effects of market volatilities on UPM Kymmene and Intermediate Capital 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 UPM Kymmene with a short position of Intermediate Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Intermediate Capital.
Diversification Opportunities for UPM Kymmene and Intermediate Capital
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between UPM and Intermediate is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital and UPM Kymmene 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 UPM Kymmene Oyj are associated (or correlated) with Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Intermediate Capital go up and down completely randomly.
Pair Corralation between UPM Kymmene and Intermediate Capital
Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the Intermediate Capital. But the stock apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.93 times less risky than Intermediate Capital. The stock trades about -0.38 of its potential returns per unit of risk. The Intermediate Capital Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 215,000 in Intermediate Capital Group on August 27, 2024 and sell it today you would lose (2,200) from holding Intermediate Capital Group or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Intermediate Capital Group
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Intermediate Capital |
UPM Kymmene and Intermediate Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Intermediate Capital
The main advantage of trading using opposite UPM Kymmene and Intermediate Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Intermediate Capital 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 Intermediate Capital will offset losses from the drop in Intermediate Capital's long position.| UPM Kymmene vs. Home Depot | UPM Kymmene vs. Intermediate Capital Group | UPM Kymmene vs. Prosiebensat 1 Media | UPM Kymmene vs. Zinc Media Group |
| Intermediate Capital vs. Universal Display Corp | Intermediate Capital vs. Hansa Investment | Intermediate Capital vs. Bankers Investment Trust | Intermediate Capital vs. Aberdeen Diversified Income |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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