Correlation Between UPM Kymmene and Nine Dragons
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Nine Dragons 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 and Nine Dragons 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 Nine Dragons Paper, you can compare the effects of market volatilities on UPM Kymmene and Nine Dragons 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 with a short position of Nine Dragons. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Nine Dragons.
Diversification Opportunities for UPM Kymmene and Nine Dragons
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between UPM and Nine is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Nine Dragons Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Dragons Paper and UPM Kymmene 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 Nine Dragons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Dragons Paper has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Nine Dragons go up and down completely randomly.
Pair Corralation between UPM Kymmene and Nine Dragons
Assuming the 90 days horizon UPM Kymmene Oyj is expected to under-perform the Nine Dragons. But the stock apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 2.19 times less risky than Nine Dragons. The stock trades about -0.35 of its potential returns per unit of risk. The Nine Dragons Paper is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Nine Dragons Paper on August 31, 2024 and sell it today you would lose (2.00) from holding Nine Dragons Paper or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Nine Dragons Paper
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Nine Dragons Paper |
UPM Kymmene and Nine Dragons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Nine Dragons
The main advantage of trading using opposite UPM Kymmene and Nine Dragons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Nine Dragons 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 Nine Dragons will offset losses from the drop in Nine Dragons' long position.| UPM Kymmene vs. Suzano SA | UPM Kymmene vs. Suzano SA | UPM Kymmene vs. Holmen AB | UPM Kymmene vs. Nine Dragons Paper |
| Nine Dragons vs. METHODE ELECTRONICS | Nine Dragons vs. TYSON FOODS A | Nine Dragons vs. Nucletron Electronic Aktiengesellschaft | Nine Dragons vs. STMicroelectronics NV |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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