Correlation Between XL Axiata and Fortune Indonesia

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

Diversification Opportunities for XL Axiata and Fortune Indonesia

0.12

Correlation Coefficient

XL Axiata  Fortune Indonesia

Average diversification

The 3 months correlation between EXCL and Fortune is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Fortune Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Indonesia Tbk 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 Fortune Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Indonesia Tbk has no effect on the direction of XL Axiata i.e., XL Axiata and Fortune Indonesia go up and down completely randomly.

Pair Corralation between XL Axiata and Fortune Indonesia

Assuming the 90 days trading horizon XL Axiata Tbk is expected to generate 0.08 times more return on investment than Fortune Indonesia. However, XL Axiata Tbk is 12.48 times less risky than Fortune Indonesia. It trades about 0.03 of its potential returns per unit of risk. Fortune Indonesia Tbk is currently generating about -0.26 per unit of risk. If you would invest  225,000  in XL Axiata Tbk on December 30, 2024 and sell it today you would earn a total of  3,000  from holding XL Axiata Tbk or generate 1.33% return on investment over 90 days.

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

XL Axiata Tbk  vs.  Fortune Indonesia Tbk

XL Axiata Tbk

Risk-Adjusted Performance

Weak

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. 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.

Fortune Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortune Indonesia Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with XL Axiata and Fortune Indonesia

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

The idea behind XL Axiata Tbk and Fortune Indonesia 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.