Correlation Between UPM-Kymmene Oyj and Sylvamo Corp

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

Diversification Opportunities for UPM-Kymmene Oyj and Sylvamo Corp

-0.72

Correlation Coefficient

UPM-Kymmene Oyj  Sylvamo Corp

Pay attention - limited upside

The 3 months correlation between UPM-Kymmene and Sylvamo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Sylvamo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sylvamo Corp 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 Sylvamo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sylvamo Corp has no effect on the direction of UPM-Kymmene Oyj i.e., UPM-Kymmene Oyj and Sylvamo Corp go up and down completely randomly.

Pair Corralation between UPM-Kymmene Oyj and Sylvamo Corp

Assuming the 90 days horizon UPM Kymmene Oyj is expected to generate 0.93 times more return on investment than Sylvamo Corp. However, UPM Kymmene Oyj is 1.08 times less risky than Sylvamo Corp. It trades about 0.06 of its potential returns per unit of risk. Sylvamo Corp is currently generating about -0.2 per unit of risk. If you would invest  2,862  in UPM Kymmene Oyj on December 4, 2024 and sell it today you would earn a total of  54.00  from holding UPM Kymmene Oyj or generate 1.89% return on investment over 90 days.

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

UPM Kymmene Oyj  vs.  Sylvamo Corp

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.

Sylvamo Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sylvamo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with UPM-Kymmene Oyj and Sylvamo Corp

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

The idea behind UPM Kymmene Oyj and Sylvamo Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.