Correlation Between Mercer International and UPM-Kymmene Oyj
Can any of the company-specific risk be diversified away by investing in both Mercer International and UPM-Kymmene Oyj 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 Mercer International and UPM-Kymmene Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercer International and UPM Kymmene Oyj, you can compare the effects of market volatilities on Mercer International and UPM-Kymmene Oyj 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 Mercer International with a short position of UPM-Kymmene Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercer International and UPM-Kymmene Oyj.
Diversification Opportunities for Mercer International and UPM-Kymmene Oyj
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mercer and UPM-Kymmene is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mercer International 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 Mercer International 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 Mercer International are associated (or correlated) with UPM-Kymmene Oyj. 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 Mercer International i.e., Mercer International and UPM-Kymmene Oyj go up and down completely randomly.
Pair Corralation between Mercer International and UPM-Kymmene Oyj
Given the investment horizon of 90 days Mercer International is expected to generate 1.46 times more return on investment than UPM-Kymmene Oyj. However, Mercer International is 1.46 times more volatile than UPM Kymmene Oyj. It trades about -0.16 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.37 per unit of risk. If you would invest 673.00 in Mercer International on August 29, 2024 and sell it today you would lose (59.00) from holding Mercer International or give up 8.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercer International vs. UPM Kymmene Oyj
Performance |
| Timeline |
| Mercer International |
| UPM Kymmene Oyj |
Mercer International and UPM-Kymmene Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercer International and UPM-Kymmene Oyj
The main advantage of trading using opposite Mercer International and UPM-Kymmene Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercer International position performs unexpectedly, UPM-Kymmene Oyj 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 Oyj will offset losses from the drop in UPM-Kymmene Oyj's long position.| Mercer International vs. Sylvamo Corp | Mercer International vs. Suzano Papel e | Mercer International vs. UPM Kymmene Oyj | Mercer International vs. Clearwater Paper |
| UPM-Kymmene Oyj vs. Mercer International | UPM-Kymmene Oyj vs. Sylvamo Corp | UPM-Kymmene Oyj vs. Suzano Papel e | UPM-Kymmene Oyj vs. Clearwater Paper |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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