Correlation Between Semen Indonesia and XL Axiata

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

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

Diversification Opportunities for Semen Indonesia and XL Axiata

0.62

Correlation Coefficient

Semen Indonesia  XL Axiata

Poor diversification

The 3 months correlation between Semen and EXCL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Semen Indonesia Persero 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 Semen Indonesia 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 Semen Indonesia Persero 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 Semen Indonesia i.e., Semen Indonesia and XL Axiata go up and down completely randomly.

Pair Corralation between Semen Indonesia and XL Axiata

Assuming the 90 days trading horizon Semen Indonesia Persero is expected to under-perform the XL Axiata. In addition to that, Semen Indonesia is 1.68 times more volatile than XL Axiata Tbk. It trades about -0.22 of its total potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.01 per unit of volatility. If you would invest  224,000  in XL Axiata Tbk on September 5, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Semen Indonesia Persero  vs.  XL Axiata Tbk

Semen Indonesia Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semen Indonesia Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Semen Indonesia and XL Axiata

The main advantage of trading using opposite Semen Indonesia and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semen Indonesia 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 Semen Indonesia Persero 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.

Check out your portfolio center.

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.