Correlation Between UPM Kymmene and Konecranes Plc

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

Diversification Opportunities for UPM Kymmene and Konecranes Plc

0.59

Correlation Coefficient

UPM Kymmene  Konecranes Plc

Very weak diversification

The 3 months correlation between UPM and Konecranes is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Konecranes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konecranes Plc 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 Konecranes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konecranes Plc has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Konecranes Plc go up and down completely randomly.

Pair Corralation between UPM Kymmene and Konecranes Plc

Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the Konecranes Plc. In addition to that, UPM Kymmene is 1.05 times more volatile than Konecranes Plc. It trades about -0.09 of its total potential returns per unit of risk. Konecranes Plc is currently generating about -0.09 per unit of volatility. If you would invest  6,740  in Konecranes Plc on September 30, 2024 and sell it today you would lose (550.00) from holding Konecranes Plc or give up 8.16% of portfolio value over 90 days.

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

UPM Kymmene Oyj  vs.  Konecranes Plc

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.

Konecranes Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Konecranes Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic 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 UPM Kymmene and Konecranes Plc

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

The idea behind UPM Kymmene Oyj and Konecranes Plc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.