Correlation Between Viafin Service and UPM Kymmene

Can any of the company-specific risk be diversified away by investing in both Viafin Service and UPM Kymmene 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 Viafin Service and UPM Kymmene into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Viafin Service Oyj and UPM Kymmene Oyj, you can compare the effects of market volatilities on Viafin Service and UPM Kymmene 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 Viafin Service with a short position of UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viafin Service and UPM Kymmene.

Diversification Opportunities for Viafin Service and UPM Kymmene

-0.81

Correlation Coefficient

Viafin Service  UPM Kymmene

Pay attention - limited upside

The 3 months correlation between Viafin and UPM is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Viafin Service Oyj and UPM Kymmene Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPM Kymmene Oyj and Viafin Service 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 Viafin Service Oyj are associated (or correlated) with UPM Kymmene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPM Kymmene Oyj has no effect on the direction of Viafin Service i.e., Viafin Service and UPM Kymmene go up and down completely randomly.

Pair Corralation between Viafin Service and UPM Kymmene

Assuming the 90 days trading horizon Viafin Service Oyj is expected to generate 1.0 times more return on investment than UPM Kymmene. However, Viafin Service Oyj is 1.0 times less risky than UPM Kymmene. It trades about 0.07 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.06 per unit of risk. If you would invest  1,820  in Viafin Service Oyj on September 14, 2024 and sell it today you would earn a total of  120.00  from holding Viafin Service Oyj or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Viafin Service Oyj  vs.  UPM Kymmene Oyj

Viafin Service Oyj

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viafin Service Oyj are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Viafin Service may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest inconsistent performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Viafin Service and UPM Kymmene

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

The idea behind Viafin Service Oyj and UPM Kymmene Oyj 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.