Correlation Between UPM Kymmene and Ponsse Oyj
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Ponsse 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 Ponsse 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 Ponsse Oyj 1, you can compare the effects of market volatilities on UPM Kymmene and Ponsse 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 Ponsse Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Ponsse Oyj.
Diversification Opportunities for UPM Kymmene and Ponsse Oyj
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between UPM and Ponsse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Ponsse Oyj 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ponsse Oyj 1 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 Ponsse Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ponsse Oyj 1 has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Ponsse Oyj go up and down completely randomly.
Pair Corralation between UPM Kymmene and Ponsse Oyj
Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the Ponsse Oyj. But the stock apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.48 times less risky than Ponsse Oyj. The stock trades about -0.15 of its potential returns per unit of risk. The Ponsse Oyj 1 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,430 in Ponsse Oyj 1 on August 28, 2024 and sell it today you would lose (290.00) from holding Ponsse Oyj 1 or give up 11.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Ponsse Oyj 1
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Ponsse Oyj 1 |
UPM Kymmene and Ponsse Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Ponsse Oyj
The main advantage of trading using opposite UPM Kymmene and Ponsse Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Ponsse 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 Ponsse Oyj will offset losses from the drop in Ponsse Oyj's long position.The idea behind UPM Kymmene Oyj and Ponsse Oyj 1 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.| Ponsse Oyj vs. Olvi Oyj A | Ponsse Oyj vs. Valmet Oyj | Ponsse Oyj vs. Wartsila Oyj Abp | Ponsse Oyj vs. UPM Kymmene 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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