Correlation Between UPM Kymmene and Valmet Oyj
Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Valmet 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 Valmet 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 Valmet Oyj, you can compare the effects of market volatilities on UPM Kymmene and Valmet 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 Valmet Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Valmet Oyj.
Diversification Opportunities for UPM Kymmene and Valmet Oyj
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UPM and Valmet is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Valmet Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmet 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 Valmet Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmet Oyj has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Valmet Oyj go up and down completely randomly.
Pair Corralation between UPM Kymmene and Valmet Oyj
Assuming the 90 days trading horizon UPM Kymmene is expected to generate 2.92 times less return on investment than Valmet Oyj. But when comparing it to its historical volatility, UPM Kymmene Oyj is 1.47 times less risky than Valmet Oyj. It trades about 0.01 of its potential returns per unit of risk. Valmet Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,484 in Valmet Oyj on November 3, 2024 and sell it today you would earn a total of 151.00 from holding Valmet Oyj or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
UPM Kymmene Oyj vs. Valmet Oyj
Performance |
| Timeline |
| UPM Kymmene Oyj |
| Valmet Oyj |
UPM Kymmene and Valmet Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UPM Kymmene and Valmet Oyj
The main advantage of trading using opposite UPM Kymmene and Valmet Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Valmet 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 Valmet Oyj will offset losses from the drop in Valmet Oyj'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 |
| Valmet Oyj vs. Nordea Bank Abp | Valmet Oyj vs. Telefonaktiebolaget LM Ericsson | Valmet Oyj vs. Telia Company AB | Valmet Oyj vs. Fortum 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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