Correlation Between XL Axiata and Royal Prima

Can any of the company-specific risk be diversified away by investing in both XL Axiata and Royal Prima 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 Royal Prima 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 Royal Prima PT, you can compare the effects of market volatilities on XL Axiata and Royal Prima 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 Royal Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of XL Axiata and Royal Prima.

Diversification Opportunities for XL Axiata and Royal Prima

-0.22

Correlation Coefficient

XL Axiata  Royal Prima

Very good diversification

The 3 months correlation between EXCL and Royal is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Royal Prima PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Prima PT 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 Royal Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Prima PT has no effect on the direction of XL Axiata i.e., XL Axiata and Royal Prima go up and down completely randomly.

Pair Corralation between XL Axiata and Royal Prima

Assuming the 90 days trading horizon XL Axiata Tbk is expected to generate 1.48 times more return on investment than Royal Prima. However, XL Axiata is 1.48 times more volatile than Royal Prima PT. It trades about 0.14 of its potential returns per unit of risk. Royal Prima PT is currently generating about -0.4 per unit of risk. If you would invest  234,000  in XL Axiata Tbk on February 4, 2024 and sell it today you would earn a total of  13,000  from holding XL Axiata Tbk or generate 5.56% return on investment over 90 days.

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

XL Axiata Tbk  vs.  Royal Prima PT

XL Axiata Tbk

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XL Axiata Tbk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, XL Axiata may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Royal Prima PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Prima PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Royal Prima 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 Royal Prima

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

The idea behind XL Axiata Tbk and Royal Prima PT 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.