Correlation Between UPM Kymmene and WITHSECURE

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

Diversification Opportunities for UPM Kymmene and WITHSECURE

0.51

Correlation Coefficient

UPM Kymmene  WITHSECURE

Very weak diversification

The 3 months correlation between UPM and WITHSECURE is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and WITHSECURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WITHSECURE 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 WITHSECURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WITHSECURE has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and WITHSECURE go up and down completely randomly.

Pair Corralation between UPM Kymmene and WITHSECURE

Assuming the 90 days trading horizon UPM Kymmene Oyj is expected to under-perform the WITHSECURE. But the stock apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.8 times less risky than WITHSECURE. The stock trades about -0.01 of its potential returns per unit of risk. The WITHSECURE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  76.00  in WITHSECURE on December 30, 2024 and sell it today you would earn a total of  15.00  from holding WITHSECURE or generate 19.74% return on investment over 90 days.

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

UPM Kymmene Oyj  vs.  WITHSECURE

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.

WITHSECURE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WITHSECURE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, WITHSECURE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UPM Kymmene and WITHSECURE

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

The idea behind UPM Kymmene Oyj and WITHSECURE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.