Correlation Between ZURICH INSURANCE and UPM Kymmene

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

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

Diversification Opportunities for ZURICH INSURANCE and UPM Kymmene

-0.78

Correlation Coefficient

ZURICH INSURANCE  UPM Kymmene

Pay attention - limited upside

The 3 months correlation between ZURICH and UPM is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ZURICH INSURANCE GROUP 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 ZURICH INSURANCE 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 ZURICH INSURANCE GROUP 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 ZURICH INSURANCE i.e., ZURICH INSURANCE and UPM Kymmene go up and down completely randomly.

Pair Corralation between ZURICH INSURANCE and UPM Kymmene

Assuming the 90 days trading horizon ZURICH INSURANCE GROUP is expected to under-perform the UPM Kymmene. But the stock apears to be less risky and, when comparing its historical volatility, ZURICH INSURANCE GROUP is 1.32 times less risky than UPM Kymmene. The stock trades about -0.23 of its potential returns per unit of risk. The UPM Kymmene Oyj is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,501  in UPM Kymmene Oyj on September 29, 2024 and sell it today you would earn a total of  53.00  from holding UPM Kymmene Oyj or generate 2.12% return on investment over 90 days.

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

ZURICH INSURANCE GROUP  vs.  UPM Kymmene Oyj

ZURICH INSURANCE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ZURICH INSURANCE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ZURICH INSURANCE and UPM Kymmene

The main advantage of trading using opposite ZURICH INSURANCE and UPM Kymmene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZURICH INSURANCE 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 ZURICH INSURANCE GROUP 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.