Correlation Between UPM-Kymmene Oyj and STORA ENSO
Can any of the company-specific risk be diversified away by investing in both UPM-Kymmene Oyj and STORA ENSO 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 Oyj and STORA ENSO 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 STORA ENSO OYJ, you can compare the effects of market volatilities on UPM-Kymmene Oyj and STORA ENSO 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 Oyj with a short position of STORA ENSO. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM-Kymmene Oyj and STORA ENSO.
Diversification Opportunities for UPM-Kymmene Oyj and STORA ENSO
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between UPM-Kymmene and STORA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and STORA ENSO OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORA ENSO OYJ and UPM-Kymmene Oyj 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 STORA ENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORA ENSO OYJ has no effect on the direction of UPM-Kymmene Oyj i.e., UPM-Kymmene Oyj and STORA ENSO go up and down completely randomly.
Pair Corralation between UPM-Kymmene Oyj and STORA ENSO
Assuming the 90 days horizon UPM Kymmene Oyj is expected to generate 0.71 times more return on investment than STORA ENSO. However, UPM Kymmene Oyj is 1.4 times less risky than STORA ENSO. It trades about -0.02 of its potential returns per unit of risk. STORA ENSO OYJ is currently generating about -0.04 per unit of risk. If you would invest 3,103 in UPM Kymmene Oyj on August 27, 2024 and sell it today you would lose (576.00) from holding UPM Kymmene Oyj or give up 18.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. STORA ENSO OYJ
Performance |
| Timeline |
| UPM Kymmene Oyj |
| STORA ENSO OYJ |
UPM-Kymmene Oyj and STORA ENSO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM-Kymmene Oyj and STORA ENSO
The main advantage of trading using opposite UPM-Kymmene Oyj and STORA ENSO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM-Kymmene Oyj position performs unexpectedly, STORA ENSO 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 STORA ENSO will offset losses from the drop in STORA ENSO's long position.| UPM-Kymmene Oyj vs. STORA ENSO OYJ | UPM-Kymmene Oyj vs. Stora Enso Oyj | UPM-Kymmene Oyj vs. Suzano SA | UPM-Kymmene Oyj vs. Suzano SA |
| STORA ENSO vs. UPM Kymmene Oyj | STORA ENSO vs. Stora Enso Oyj | STORA ENSO vs. Suzano SA | STORA ENSO vs. Suzano SA |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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