Correlation Between UPM Kymmene and F SECURE

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

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

Diversification Opportunities for UPM Kymmene and F SECURE

-0.28

Correlation Coefficient

UPM Kymmene  F SECURE

Very good diversification

The 3 months correlation between UPM and FSECURE is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and F SECURE OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F SECURE OYJ and UPM Kymmene 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 UPM Kymmene Oyj are associated (or correlated) with F SECURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F SECURE OYJ has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and F SECURE go up and down completely randomly.

Pair Corralation between UPM Kymmene and F SECURE

Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the F SECURE. In addition to that, UPM Kymmene is 1.11 times more volatile than F SECURE OYJ. It trades about -0.01 of its total potential returns per unit of risk. F SECURE OYJ is currently generating about 0.01 per unit of volatility. If you would invest  178.00  in F SECURE OYJ on December 30, 2024 and sell it today you would earn a total of  0.00  from holding F SECURE OYJ or generate 0.0% return on investment over 90 days.

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

UPM Kymmene Oyj  vs.  F SECURE OYJ

UPM Kymmene Oyj

Risk-Adjusted Performance

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 rather sound primary indicators, UPM Kymmene is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

F SECURE OYJ

Risk-Adjusted Performance

Very Weak

Over the last 90 days F SECURE OYJ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, F SECURE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UPM Kymmene and F SECURE

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

The idea behind UPM Kymmene Oyj and F SECURE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.