Correlation Between De Grey and UPM-Kymmene Oyj

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

Diversification Opportunities for De Grey and UPM-Kymmene Oyj

0.66

Correlation Coefficient

De Grey  UPM-Kymmene Oyj

Poor diversification

The 3 months correlation between DGD and UPM-Kymmene is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining 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 De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and UPM-Kymmene Oyj go up and down completely randomly.

Pair Corralation between De Grey and UPM-Kymmene Oyj

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.61 times more return on investment than UPM-Kymmene Oyj. However, De Grey is 1.61 times more volatile than UPM Kymmene Oyj. It trades about 0.09 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about 0.08 per unit of risk. If you would invest  108.00  in De Grey Mining on December 19, 2024 and sell it today you would earn a total of  12.00  from holding De Grey Mining or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

De Grey Mining  vs.  UPM Kymmene Oyj

De Grey Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly fragile basic indicators, UPM-Kymmene Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with De Grey and UPM-Kymmene Oyj

The main advantage of trading using opposite De Grey and UPM-Kymmene Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.