Correlation Between Wartsila Oyj and UPM Kymmene
Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and UPM Kymmene 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 Wartsila Oyj and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wartsila Oyj Abp and UPM Kymmene Oyj, you can compare the effects of market volatilities on Wartsila Oyj and UPM Kymmene 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 Wartsila Oyj with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and UPM Kymmene.
Diversification Opportunities for Wartsila Oyj and UPM Kymmene
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wartsila and UPM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and UPM Kymmene Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPM Kymmene Oyj and Wartsila Oyj 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 Wartsila Oyj Abp are associated (or correlated) with UPM Kymmene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPM Kymmene Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and UPM Kymmene go up and down completely randomly.
Pair Corralation between Wartsila Oyj and UPM Kymmene
Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to generate 1.33 times more return on investment than UPM Kymmene. However, Wartsila Oyj is 1.33 times more volatile than UPM Kymmene Oyj. It trades about 0.1 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.01 per unit of risk. If you would invest 972.00 in Wartsila Oyj Abp on August 28, 2024 and sell it today you would earn a total of 804.00 from holding Wartsila Oyj Abp or generate 82.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wartsila Oyj Abp vs. UPM Kymmene Oyj
Performance |
| Timeline |
| Wartsila Oyj Abp |
| UPM Kymmene Oyj |
Wartsila Oyj and UPM Kymmene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wartsila Oyj and UPM Kymmene
The main advantage of trading using opposite Wartsila Oyj and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wartsila Oyj position performs unexpectedly, UPM Kymmene 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 UPM Kymmene will offset losses from the drop in UPM Kymmene's long position.| Wartsila Oyj vs. Aktia Bank Abp | Wartsila Oyj vs. Alandsbanken Abp B | Wartsila Oyj vs. Alandsbanken Abp A | Wartsila Oyj 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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