Correlation Between XL Axiata and Indal Aluminium

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

Diversification Opportunities for XL Axiata and Indal Aluminium

-0.36

Correlation Coefficient

XL Axiata  Indal Aluminium

Very good diversification

The 3 months correlation between EXCL and Indal is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Indal Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indal Aluminium Industry 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 Indal Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indal Aluminium Industry has no effect on the direction of XL Axiata i.e., XL Axiata and Indal Aluminium go up and down completely randomly.

Pair Corralation between XL Axiata and Indal Aluminium

Assuming the 90 days trading horizon XL Axiata is expected to generate 11.43 times less return on investment than Indal Aluminium. But when comparing it to its historical volatility, XL Axiata Tbk is 15.57 times less risky than Indal Aluminium. It trades about 0.1 of its potential returns per unit of risk. Indal Aluminium Industry is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16,400  in Indal Aluminium Industry on December 29, 2024 and sell it today you would earn a total of  500.00  from holding Indal Aluminium Industry or generate 3.05% 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.  Indal Aluminium Industry

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.

Indal Aluminium Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indal Aluminium Industry are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indal Aluminium disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XL Axiata and Indal Aluminium

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

The idea behind XL Axiata Tbk and Indal Aluminium Industry 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.