Correlation Between Nine Dragons and UPM Kymmene

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

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

Diversification Opportunities for Nine Dragons and UPM Kymmene

0.57

Correlation Coefficient

Nine Dragons  UPM Kymmene

Very weak diversification

The 3 months correlation between Nine and UPM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nine Dragons 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 Nine Dragons 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 Nine Dragons Paper 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 Nine Dragons i.e., Nine Dragons and UPM Kymmene go up and down completely randomly.

Pair Corralation between Nine Dragons and UPM Kymmene

Assuming the 90 days horizon Nine Dragons Paper is expected to under-perform the UPM Kymmene. In addition to that, Nine Dragons is 2.12 times more volatile than UPM Kymmene Oyj. It trades about -0.04 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  3,270  in UPM Kymmene Oyj on October 11, 2024 and sell it today you would lose (501.00) from holding UPM Kymmene Oyj or give up 15.32% of portfolio value over 90 days.

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

Nine Dragons Paper  vs.  UPM Kymmene Oyj

Nine Dragons Paper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nine Dragons Paper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nine Dragons and UPM Kymmene

The main advantage of trading using opposite Nine Dragons and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nine Dragons 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 Nine Dragons 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.