Correlation Between Nippon Telegraph and XL Axiata

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

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

Diversification Opportunities for Nippon Telegraph and XL Axiata

0.48

Correlation Coefficient

Nippon Telegraph  XL Axiata

Very weak diversification

The 3 months correlation between Nippon and PTXKY is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Telegraph Telephone and XL Axiata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XL Axiata Tbk and Nippon Telegraph 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 Nippon Telegraph Telephone are associated (or correlated) with XL Axiata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XL Axiata Tbk has no effect on the direction of Nippon Telegraph i.e., Nippon Telegraph and XL Axiata go up and down completely randomly.

Pair Corralation between Nippon Telegraph and XL Axiata

Assuming the 90 days horizon Nippon Telegraph is expected to generate 18.46 times less return on investment than XL Axiata. But when comparing it to its historical volatility, Nippon Telegraph Telephone is 1.24 times less risky than XL Axiata. It trades about 0.0 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  271.00  in XL Axiata Tbk on September 12, 2024 and sell it today you would earn a total of  51.00  from holding XL Axiata Tbk or generate 18.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.29%
Values	Daily Returns

Nippon Telegraph Telephone  vs.  XL Axiata Tbk

Nippon Telegraph Tel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Telegraph Telephone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

XL Axiata Tbk

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XL Axiata Tbk are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, XL Axiata may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nippon Telegraph and XL Axiata

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

The idea behind Nippon Telegraph Telephone and XL Axiata 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.