Correlation Between Smurfit Kappa and UMWELTBANK

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

By analyzing existing cross correlation between Smurfit Kappa Group and UMWELTBANK, you can compare the effects of market volatilities on Smurfit Kappa and UMWELTBANK 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 Smurfit Kappa with a short position of UMWELTBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and UMWELTBANK.

Diversification Opportunities for Smurfit Kappa and UMWELTBANK

0.67

Correlation Coefficient

Smurfit Kappa  UMWELTBANK

Poor diversification

The 3 months correlation between Smurfit and UMWELTBANK is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK and Smurfit Kappa 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 Smurfit Kappa Group are associated (or correlated) with UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and UMWELTBANK go up and down completely randomly.

Pair Corralation between Smurfit Kappa and UMWELTBANK

Assuming the 90 days horizon Smurfit Kappa Group is expected to generate 1.93 times more return on investment than UMWELTBANK. However, Smurfit Kappa is 1.93 times more volatile than UMWELTBANK. It trades about 0.07 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.03 per unit of risk. If you would invest  4,206  in Smurfit Kappa Group on September 27, 2024 and sell it today you would earn a total of  854.00  from holding Smurfit Kappa Group or generate 20.3% return on investment over 90 days.

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

Smurfit Kappa Group  vs.  UMWELTBANK

Smurfit Kappa Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

UMWELTBANK

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, UMWELTBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smurfit Kappa and UMWELTBANK

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

The idea behind Smurfit Kappa Group and UMWELTBANK 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.

Check out your portfolio center.

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.