Correlation Between Clearwater Paper and UPM-Kymmene Oyj

Can any of the company-specific risk be diversified away by investing in both Clearwater Paper and UPM-Kymmene 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 Clearwater Paper and UPM-Kymmene Oyj into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clearwater Paper and UPM Kymmene Oyj, you can compare the effects of market volatilities on Clearwater Paper and UPM-Kymmene 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 Clearwater Paper with a short position of UPM-Kymmene Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearwater Paper and UPM-Kymmene Oyj.

Diversification Opportunities for Clearwater Paper and UPM-Kymmene Oyj

0.11

Correlation Coefficient

Clearwater Paper  UPM-Kymmene Oyj

Average diversification

The 3 months correlation between Clearwater and UPM-Kymmene is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Clearwater Paper 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 Clearwater Paper 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 Clearwater Paper are associated (or correlated) with UPM-Kymmene Oyj. 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 Clearwater Paper i.e., Clearwater Paper and UPM-Kymmene Oyj go up and down completely randomly.

Pair Corralation between Clearwater Paper and UPM-Kymmene Oyj

Considering the 90-day investment horizon Clearwater Paper is expected to under-perform the UPM-Kymmene Oyj. In addition to that, Clearwater Paper is 1.68 times more volatile than UPM Kymmene Oyj. It trades about -0.31 of its total potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.06 per unit of volatility. If you would invest  2,862  in UPM Kymmene Oyj on December 4, 2024 and sell it today you would earn a total of  54.00  from holding UPM Kymmene Oyj or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Clearwater Paper  vs.  UPM Kymmene Oyj

Clearwater Paper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearwater Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Clearwater Paper is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

UPM Kymmene Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UPM Kymmene Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady primary indicators, UPM-Kymmene Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Clearwater Paper and UPM-Kymmene Oyj

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

The idea behind Clearwater Paper 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.