Correlation Between UPM Kymmene and Kemira Oyj
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Kemira Oyj 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 Kemira Oyj 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 Kemira Oyj, you can compare the effects of market volatilities on UPM Kymmene and Kemira Oyj 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 Kemira Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Kemira Oyj.
Diversification Opportunities for UPM Kymmene and Kemira Oyj
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between UPM and Kemira is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Kemira Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemira Oyj 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 Kemira Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemira Oyj has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Kemira Oyj go up and down completely randomly.
Pair Corralation between UPM Kymmene and Kemira Oyj
Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to generate 1.0 times more return on investment than Kemira Oyj. However, UPM Kymmene is 1.0 times more volatile than Kemira Oyj. It trades about -0.29 of its potential returns per unit of risk. Kemira Oyj is currently generating about -0.3 per unit of risk. If you would invest 2,829 in UPM Kymmene Oyj on August 27, 2024 and sell it today you would lose (239.00) from holding UPM Kymmene Oyj or give up 8.45% 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. Kemira Oyj
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Kemira Oyj |
UPM Kymmene and Kemira Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Kemira Oyj
The main advantage of trading using opposite UPM Kymmene and Kemira Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Kemira Oyj 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 Kemira Oyj will offset losses from the drop in Kemira Oyj's long position.The idea behind UPM Kymmene Oyj and Kemira 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.| Kemira Oyj vs. UPM Kymmene Oyj | Kemira Oyj vs. Wartsila Oyj Abp | Kemira Oyj vs. Sampo Oyj A | Kemira Oyj vs. Valmet 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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