Correlation Between XL Axiata and Erajaya Swasembada

Can any of the company-specific risk be diversified away by investing in both XL Axiata and Erajaya Swasembada 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 XL Axiata and Erajaya Swasembada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XL Axiata Tbk and Erajaya Swasembada Tbk, you can compare the effects of market volatilities on XL Axiata and Erajaya Swasembada 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 XL Axiata with a short position of Erajaya Swasembada. Check out your portfolio center. Please also check ongoing floating volatility patterns of XL Axiata and Erajaya Swasembada.

Diversification Opportunities for XL Axiata and Erajaya Swasembada

0.51

Correlation Coefficient

XL Axiata  Erajaya Swasembada

Very weak diversification

The 3 months correlation between EXCL and Erajaya is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Erajaya Swasembada Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erajaya Swasembada Tbk and XL Axiata 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 XL Axiata Tbk are associated (or correlated) with Erajaya Swasembada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erajaya Swasembada Tbk has no effect on the direction of XL Axiata i.e., XL Axiata and Erajaya Swasembada go up and down completely randomly.

Pair Corralation between XL Axiata and Erajaya Swasembada

Assuming the 90 days trading horizon XL Axiata Tbk is expected to generate 0.48 times more return on investment than Erajaya Swasembada. However, XL Axiata Tbk is 2.09 times less risky than Erajaya Swasembada. It trades about 0.01 of its potential returns per unit of risk. Erajaya Swasembada Tbk is currently generating about -0.03 per unit of risk. If you would invest  229,000  in XL Axiata Tbk on September 12, 2024 and sell it today you would earn a total of  0.00  from holding XL Axiata Tbk or generate 0.0% return on investment over 90 days.

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

XL Axiata Tbk  vs.  Erajaya Swasembada Tbk

XL Axiata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, XL Axiata is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Erajaya Swasembada Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erajaya Swasembada Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Erajaya Swasembada is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with XL Axiata and Erajaya Swasembada

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

The idea behind XL Axiata Tbk and Erajaya Swasembada Tbk 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.