Correlation Between China Tower and XL Axiata

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

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

Diversification Opportunities for China Tower and XL Axiata

-0.09

Correlation Coefficient

China Tower  XL Axiata

Good diversification

The 3 months correlation between China and PTXKY is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Tower 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 China Tower 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 China Tower 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 China Tower i.e., China Tower and XL Axiata go up and down completely randomly.

Pair Corralation between China Tower and XL Axiata

Assuming the 90 days horizon China Tower is expected to generate 7.8 times more return on investment than XL Axiata. However, China Tower is 7.8 times more volatile than XL Axiata Tbk. It trades about 0.12 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.03 per unit of risk. If you would invest  12.00  in China Tower on October 5, 2024 and sell it today you would earn a total of  2.00  from holding China Tower or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.99%
Values	Daily Returns

China Tower  vs.  XL Axiata Tbk

China Tower

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Tower are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Tower is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

XL Axiata Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XL Axiata Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, XL Axiata may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Tower and XL Axiata

The main advantage of trading using opposite China Tower and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Tower 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 China Tower 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.