Correlation Between Orion Oyj and UPM Kymmene

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

Diversification Opportunities for Orion Oyj and UPM Kymmene

0.69

Correlation Coefficient

Orion Oyj  UPM Kymmene

Poor diversification

The 3 months correlation between Orion and UPM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Orion Oyj B 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 Orion 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 Orion Oyj B 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 Orion Oyj i.e., Orion Oyj and UPM Kymmene go up and down completely randomly.

Pair Corralation between Orion Oyj and UPM Kymmene

Assuming the 90 days trading horizon Orion Oyj B is expected to under-perform the UPM Kymmene. But the stock apears to be less risky and, when comparing its historical volatility, Orion Oyj B is 1.04 times less risky than UPM Kymmene. The stock trades about -0.05 of its potential returns per unit of risk. The UPM Kymmene Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,680  in UPM Kymmene Oyj on October 7, 2024 and sell it today you would earn a total of  6.00  from holding UPM Kymmene Oyj or generate 0.22% return on investment over 90 days.

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

Orion Oyj B  vs.  UPM Kymmene Oyj

Orion Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent 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

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 latest inconsistent performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Orion Oyj and UPM Kymmene

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