Correlation Between UPM Kymmene and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Nordea Bank 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 Nordea Bank 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 Nordea Bank Abp, you can compare the effects of market volatilities on UPM Kymmene and Nordea Bank 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 Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Nordea Bank.
Diversification Opportunities for UPM Kymmene and Nordea Bank
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between UPM and Nordea is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Nordea Bank go up and down completely randomly.
Pair Corralation between UPM Kymmene and Nordea Bank
Assuming the 90 days trading horizon UPM Kymmene is expected to generate 1.81 times less return on investment than Nordea Bank. In addition to that, UPM Kymmene is 1.48 times more volatile than Nordea Bank Abp. It trades about 0.22 of its total potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.58 per unit of volatility. If you would invest 1,030 in Nordea Bank Abp on October 23, 2024 and sell it today you would earn a total of 94.00 from holding Nordea Bank Abp or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Nordea Bank Abp
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Nordea Bank Abp |
UPM Kymmene and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Nordea Bank
The main advantage of trading using opposite UPM Kymmene and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Nordea Bank 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 Nordea Bank will offset losses from the drop in Nordea Bank's long position.| UPM Kymmene vs. Sampo Oyj A | UPM Kymmene vs. Fortum Oyj | UPM Kymmene vs. Nordea Bank Abp | UPM Kymmene vs. Stora Enso Oyj |
| Nordea Bank vs. Sampo Oyj A | Nordea Bank vs. Fortum Oyj | Nordea Bank vs. UPM Kymmene Oyj | Nordea Bank vs. Neste Oil 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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