Correlation Between Axiata Group and Aeon Credit

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

By analyzing existing cross correlation between Axiata Group Bhd and Aeon Credit Service, you can compare the effects of market volatilities on Axiata Group and Aeon Credit 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 Axiata Group with a short position of Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axiata Group and Aeon Credit.

Diversification Opportunities for Axiata Group and Aeon Credit

-0.44

Correlation Coefficient

Axiata Group  Aeon Credit

Very good diversification

The 3 months correlation between Axiata and Aeon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Axiata Group Bhd and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service and Axiata Group 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 Axiata Group Bhd are associated (or correlated) with Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of Axiata Group i.e., Axiata Group and Aeon Credit go up and down completely randomly.

Pair Corralation between Axiata Group and Aeon Credit

Assuming the 90 days trading horizon Axiata Group Bhd is expected to generate 1.65 times more return on investment than Aeon Credit. However, Axiata Group is 1.65 times more volatile than Aeon Credit Service. It trades about -0.04 of its potential returns per unit of risk. Aeon Credit Service is currently generating about -0.25 per unit of risk. If you would invest  241.00  in Axiata Group Bhd on October 11, 2024 and sell it today you would lose (11.00) from holding Axiata Group Bhd or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Axiata Group Bhd  vs.  Aeon Credit Service

Axiata Group Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service 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 basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Axiata Group and Aeon Credit

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

The idea behind Axiata Group Bhd and Aeon Credit Service 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.