Correlation Between UPM-Kymmene Oyj and Klabin Sa

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

Diversification Opportunities for UPM-Kymmene Oyj and Klabin Sa

0.19

Correlation Coefficient

UPM-Kymmene Oyj  Klabin Sa

Average diversification

The 3 months correlation between UPM-Kymmene and Klabin is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Klabin Sa A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klabin Sa A and UPM-Kymmene 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 UPM Kymmene Oyj are associated (or correlated) with Klabin Sa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klabin Sa A has no effect on the direction of UPM-Kymmene Oyj i.e., UPM-Kymmene Oyj and Klabin Sa go up and down completely randomly.

Pair Corralation between UPM-Kymmene Oyj and Klabin Sa

Assuming the 90 days horizon UPM-Kymmene Oyj is expected to generate 9.79 times less return on investment than Klabin Sa. But when comparing it to its historical volatility, UPM Kymmene Oyj is 1.51 times less risky than Klabin Sa. It trades about 0.01 of its potential returns per unit of risk. Klabin Sa A is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  609.00  in Klabin Sa A on December 4, 2024 and sell it today you would earn a total of  146.00  from holding Klabin Sa A or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.03%
Values	Daily Returns

UPM Kymmene Oyj  vs.  Klabin Sa A

UPM Kymmene Oyj

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UPM Kymmene Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady primary indicators, UPM-Kymmene Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Klabin Sa A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Klabin Sa A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Klabin Sa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UPM-Kymmene Oyj and Klabin Sa

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

The idea behind UPM Kymmene Oyj and Klabin Sa A 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 Transaction History module to view history of all your transactions and understand their impact on performance.