Correlation Between UPM Kymmene and Klabin Sa

Can any of the company-specific risk be diversified away by investing in both UPM Kymmene 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 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 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 with a short position of Klabin Sa. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPM Kymmene and Klabin Sa.

Diversification Opportunities for UPM Kymmene and Klabin Sa

0.38

Correlation Coefficient

UPM Kymmene  Klabin Sa

Weak diversification

The 3 months correlation between UPM and Klabin is 0.38. 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 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 i.e., UPM Kymmene and Klabin Sa go up and down completely randomly.

Pair Corralation between UPM Kymmene and Klabin Sa

Assuming the 90 days horizon UPM Kymmene Oyj is expected to under-perform the Klabin Sa. But the pink sheet apears to be less risky and, when comparing its historical volatility, UPM Kymmene Oyj is 1.83 times less risky than Klabin Sa. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Klabin Sa A is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  776.00  in Klabin Sa A on September 13, 2024 and sell it today you would lose (16.00) from holding Klabin Sa A or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

UPM Kymmene Oyj  vs.  Klabin Sa A

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 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.

Klabin Sa A

Risk-Adjusted Performance

0 of 100

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 and Klabin Sa

The main advantage of trading using opposite UPM Kymmene and Klabin Sa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPM Kymmene 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.