Correlation Between Nordea Bank and UPM Kymmene
Can any of the company-specific risk be diversified away by investing in both Nordea Bank 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 Nordea Bank and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordea Bank Abp and UPM Kymmene Oyj, you can compare the effects of market volatilities on Nordea Bank 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 Nordea Bank with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordea Bank and UPM Kymmene.
Diversification Opportunities for Nordea Bank and UPM Kymmene
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nordea and UPM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nordea Bank Abp 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 Nordea Bank 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 Nordea Bank Abp 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 Nordea Bank i.e., Nordea Bank and UPM Kymmene go up and down completely randomly.
Pair Corralation between Nordea Bank and UPM Kymmene
Assuming the 90 days trading horizon Nordea Bank Abp is expected to generate 0.79 times more return on investment than UPM Kymmene. However, Nordea Bank Abp is 1.26 times less risky than UPM Kymmene. It trades about 0.33 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.16 per unit of risk. If you would invest 1,069 in Nordea Bank Abp on November 3, 2024 and sell it today you would earn a total of 79.00 from holding Nordea Bank Abp or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordea Bank Abp vs. UPM Kymmene Oyj
Performance |
| Timeline |
| Nordea Bank Abp |
| UPM Kymmene Oyj |
Nordea Bank and UPM Kymmene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordea Bank and UPM Kymmene
The main advantage of trading using opposite Nordea Bank and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordea Bank 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.| Nordea Bank vs. Sampo Oyj A | Nordea Bank vs. Fortum Oyj | Nordea Bank vs. UPM Kymmene Oyj | Nordea Bank vs. Neste Oil Oyj |
| UPM Kymmene vs. Sampo Oyj A | UPM Kymmene vs. Fortum Oyj | UPM Kymmene vs. Nordea Bank Abp | UPM Kymmene vs. Stora Enso Oyj |
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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