Correlation Between Mondi PLC and UPM Kymmene
Can any of the company-specific risk be diversified away by investing in both Mondi PLC 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 Mondi PLC and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mondi PLC ADR and UPM Kymmene Oyj, you can compare the effects of market volatilities on Mondi PLC 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 Mondi PLC with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mondi PLC and UPM Kymmene.
Diversification Opportunities for Mondi PLC and UPM Kymmene
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mondi and UPM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mondi PLC ADR 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 Mondi PLC 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 Mondi PLC ADR 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 Mondi PLC i.e., Mondi PLC and UPM Kymmene go up and down completely randomly.
Pair Corralation between Mondi PLC and UPM Kymmene
Assuming the 90 days horizon Mondi PLC ADR is expected to generate 1.18 times more return on investment than UPM Kymmene. However, Mondi PLC is 1.18 times more volatile than UPM Kymmene Oyj. It trades about 0.01 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.02 per unit of risk. If you would invest 3,103 in Mondi PLC ADR on September 13, 2024 and sell it today you would lose (77.00) from holding Mondi PLC ADR or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mondi PLC ADR vs. UPM Kymmene Oyj
Performance |
| Timeline |
| Mondi PLC ADR |
| UPM Kymmene Oyj |
Mondi PLC and UPM Kymmene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mondi PLC and UPM Kymmene
The main advantage of trading using opposite Mondi PLC and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mondi PLC 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.The idea behind Mondi PLC ADR and UPM Kymmene Oyj 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.| UPM Kymmene vs. Mercer International | UPM Kymmene vs. Sylvamo Corp | UPM Kymmene vs. Suzano Papel e | UPM Kymmene 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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