Correlation Between UPM Kymmene and Kemira Oyj

Can any of the company-specific risk be diversified away by investing in both UPM Kymmene and Kemira 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 Kemira 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 Kemira Oyj, you can compare the effects of market volatilities on UPM Kymmene and Kemira 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 Kemira Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Kemira Oyj.

Diversification Opportunities for UPM Kymmene and Kemira Oyj

0.76

Correlation Coefficient

UPM Kymmene  Kemira Oyj

Poor diversification

The 3 months correlation between UPM and Kemira is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Kemira Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemira 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 Kemira Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemira Oyj has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Kemira Oyj go up and down completely randomly.

Pair Corralation between UPM Kymmene and Kemira Oyj

Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the Kemira Oyj. But the stock apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.32 times less risky than Kemira Oyj. The stock trades about 0.0 of its potential returns per unit of risk. The Kemira Oyj is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,076  in Kemira Oyj on June 23, 2024 and sell it today you would earn a total of  1,140  from holding Kemira Oyj or generate 105.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

UPM Kymmene Oyj  vs.  Kemira Oyj

UPM Kymmene Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPM Kymmene Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kemira Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kemira Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Kemira Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UPM Kymmene and Kemira Oyj

The main advantage of trading using opposite UPM Kymmene and Kemira Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Kemira 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 Kemira Oyj will offset losses from the drop in Kemira Oyj's long position.

The idea behind UPM Kymmene Oyj and Kemira Oyj 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.

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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.