Correlation Between UPM Kymmene and Stora Enso
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Stora Enso 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 Stora Enso 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 Stora Enso Oyj, you can compare the effects of market volatilities on UPM Kymmene and Stora Enso 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 Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Stora Enso.
Diversification Opportunities for UPM Kymmene and Stora Enso
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UPM and Stora is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso 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 Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Stora Enso go up and down completely randomly.
Pair Corralation between UPM Kymmene and Stora Enso
Assuming the 90 days trading horizon UPM Kymmene is expected to generate 1.42 times less return on investment than Stora Enso. But when comparing it to its historical volatility, UPM Kymmene Oyj is 1.0 times less risky than Stora Enso. It trades about 0.22 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 938.00 in Stora Enso Oyj on October 23, 2024 and sell it today you would earn a total of 70.00 from holding Stora Enso Oyj or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.75% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Stora Enso Oyj
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Stora Enso Oyj |
UPM Kymmene and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Stora Enso
The main advantage of trading using opposite UPM Kymmene and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Stora Enso 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 Stora Enso will offset losses from the drop in Stora Enso'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 |
| Stora Enso vs. UPM Kymmene Oyj | Stora Enso vs. Wartsila Oyj Abp | Stora Enso vs. Fortum Oyj | Stora Enso vs. Sampo Oyj A |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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