Correlation Between UPM Kymmene and Suzano Papel

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

Diversification Opportunities for UPM Kymmene and Suzano Papel

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between UPM and Suzano is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding UPM Kymmene Oyj and Suzano Papel e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano Papel e 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 Suzano Papel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano Papel e has no effect on the direction of UPM Kymmene i.e., UPM Kymmene and Suzano Papel go up and down completely randomly.

Pair Corralation between UPM Kymmene and Suzano Papel

Assuming the 90 days horizon UPM Kymmene Oyj is expected to under-perform the Suzano Papel. But the pink sheet apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.24 times less risky than Suzano Papel. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Suzano Papel e is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Suzano Papel e on September 14, 2024 and sell it today you would lose (59.00) from holding Suzano Papel e or give up 5.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

UPM Kymmene Oyj  vs.  Suzano Papel e

 Performance 
       Timeline  
UPM Kymmene Oyj 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Suzano Papel e 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Suzano Papel e are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Suzano Papel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UPM Kymmene and Suzano Papel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with UPM Kymmene and Suzano Papel

The main advantage of trading using opposite UPM Kymmene and Suzano Papel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene position performs unexpectedly, Suzano Papel 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 Suzano Papel will offset losses from the drop in Suzano Papel's long position.
The idea behind UPM Kymmene Oyj and Suzano Papel e 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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