Correlation Between UPM Kymmene and Alandsbanken Abp

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

Diversification Opportunities for UPM Kymmene and Alandsbanken Abp

-0.52

Correlation Coefficient

UPM Kymmene  Alandsbanken Abp

Excellent diversification

The 3 months correlation between UPM and Alandsbanken is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Alandsbanken Abp B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alandsbanken Abp B 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 Alandsbanken Abp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alandsbanken Abp B has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Alandsbanken Abp go up and down completely randomly.

Pair Corralation between UPM Kymmene and Alandsbanken Abp

Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to generate 0.87 times more return on investment than Alandsbanken Abp. However, UPM Kymmene Oyj is 1.14 times less risky than Alandsbanken Abp. It trades about 0.35 of its potential returns per unit of risk. Alandsbanken Abp B is currently generating about -0.09 per unit of risk. If you would invest  3,043  in UPM Kymmene Oyj on January 31, 2024 and sell it today you would earn a total of  263.00  from holding UPM Kymmene Oyj or generate 8.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

UPM Kymmene Oyj  vs.  Alandsbanken Abp B

UPM Kymmene Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UPM Kymmene Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, UPM Kymmene is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Alandsbanken Abp B

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alandsbanken Abp B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Alandsbanken Abp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with UPM Kymmene and Alandsbanken Abp

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

The idea behind UPM Kymmene Oyj and Alandsbanken Abp B 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 CEOs Directory module to screen CEOs from public companies around the world.