Correlation Between Cargotec Oyj and UPM Kymmene

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

Diversification Opportunities for Cargotec Oyj and UPM Kymmene

-0.42

Correlation Coefficient

Cargotec Oyj  UPM Kymmene

Very good diversification

The 3 months correlation between Cargotec and UPM is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cargotec Oyj 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 Cargotec 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 Cargotec Oyj 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 Cargotec Oyj i.e., Cargotec Oyj and UPM Kymmene go up and down completely randomly.

Pair Corralation between Cargotec Oyj and UPM Kymmene

Assuming the 90 days trading horizon Cargotec Oyj is expected to under-perform the UPM Kymmene. In addition to that, Cargotec Oyj is 1.39 times more volatile than UPM Kymmene Oyj. It trades about -0.08 of its total potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.01 per unit of volatility. If you would invest  2,579  in UPM Kymmene Oyj on December 30, 2024 and sell it today you would lose (54.00) from holding UPM Kymmene Oyj or give up 2.09% of portfolio value over 90 days.

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

Cargotec Oyj  vs.  UPM Kymmene Oyj

Cargotec Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cargotec Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

UPM Kymmene Oyj

Risk-Adjusted Performance

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 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.

Pair Trading with Cargotec Oyj and UPM Kymmene

The main advantage of trading using opposite Cargotec Oyj and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cargotec 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.

The idea behind Cargotec Oyj and UPM Kymmene 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.