Correlation Between Universal Entertainment and UPM Kymmene
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment 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 Universal Entertainment and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and UPM Kymmene Oyj, you can compare the effects of market volatilities on Universal Entertainment 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 Universal Entertainment with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and UPM Kymmene.
Diversification Opportunities for Universal Entertainment and UPM Kymmene
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and UPM is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment i.e., Universal Entertainment and UPM Kymmene go up and down completely randomly.
Pair Corralation between Universal Entertainment and UPM Kymmene
Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the UPM Kymmene. In addition to that, Universal Entertainment is 4.48 times more volatile than UPM Kymmene Oyj. It trades about -0.09 of its total potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.23 per unit of volatility. If you would invest 2,687 in UPM Kymmene Oyj on September 5, 2024 and sell it today you would lose (152.00) from holding UPM Kymmene Oyj or give up 5.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Universal Entertainment vs. UPM Kymmene Oyj
Performance |
| Timeline |
| Universal Entertainment |
| UPM Kymmene Oyj |
Universal Entertainment and UPM Kymmene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and UPM Kymmene
The main advantage of trading using opposite Universal Entertainment and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment 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.| Universal Entertainment vs. TOTAL GABON | Universal Entertainment vs. Walgreens Boots Alliance | Universal Entertainment vs. Peak Resources Limited |
| UPM Kymmene vs. Townsquare Media | UPM Kymmene vs. REMEDY ENTERTAINMENT OYJ | UPM Kymmene vs. Tencent Music Entertainment | UPM Kymmene vs. Universal Entertainment |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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