Correlation Between BASF SE and UPM Kymmene
Can any of the company-specific risk be diversified away by investing in both BASF SE and UPM Kymmene 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 BASF SE and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASF SE NA and UPM Kymmene Oyj, you can compare the effects of market volatilities on BASF SE and UPM Kymmene 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 BASF SE with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASF SE and UPM Kymmene.
Diversification Opportunities for BASF SE and UPM Kymmene
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BASF and UPM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BASF SE NA and UPM Kymmene Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPM Kymmene Oyj and BASF SE 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 BASF SE NA are associated (or correlated) with UPM Kymmene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPM Kymmene Oyj has no effect on the direction of BASF SE i.e., BASF SE and UPM Kymmene go up and down completely randomly.
Pair Corralation between BASF SE and UPM Kymmene
Assuming the 90 days horizon BASF SE NA is expected to generate 0.68 times more return on investment than UPM Kymmene. However, BASF SE NA is 1.47 times less risky than UPM Kymmene. It trades about 0.0 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.0 per unit of risk. If you would invest 4,954 in BASF SE NA on September 12, 2024 and sell it today you would lose (254.00) from holding BASF SE NA or give up 5.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.67% |
| Values | Daily Returns |
BASF SE NA vs. UPM Kymmene Oyj
Performance |
| Timeline |
| BASF SE NA |
| UPM Kymmene Oyj |
BASF SE and UPM Kymmene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASF SE and UPM Kymmene
The main advantage of trading using opposite BASF SE and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASF SE position performs unexpectedly, UPM Kymmene 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 UPM Kymmene will offset losses from the drop in UPM Kymmene's long position.| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. BASF SE ADR | BASF SE vs. Braskem SA Class | BASF SE vs. Celanese |
| UPM Kymmene vs. Canfor Pulp Products | UPM Kymmene vs. Mondi PLC ADR | UPM Kymmene vs. Nine Dragons Paper | UPM Kymmene vs. Sylvamo Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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