Correlation Between XL Axiata and Japfa Comfeed

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

Diversification Opportunities for XL Axiata and Japfa Comfeed

0.72

Correlation Coefficient

XL Axiata  Japfa Comfeed

Poor diversification

The 3 months correlation between EXCL and Japfa is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Japfa Comfeed Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japfa Comfeed Indonesia 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 Japfa Comfeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japfa Comfeed Indonesia has no effect on the direction of XL Axiata i.e., XL Axiata and Japfa Comfeed go up and down completely randomly.

Pair Corralation between XL Axiata and Japfa Comfeed

Assuming the 90 days trading horizon XL Axiata Tbk is expected to under-perform the Japfa Comfeed. But the stock apears to be less risky and, when comparing its historical volatility, XL Axiata Tbk is 2.92 times less risky than Japfa Comfeed. The stock trades about -0.01 of its potential returns per unit of risk. The Japfa Comfeed Indonesia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  171,000  in Japfa Comfeed Indonesia on December 1, 2024 and sell it today you would earn a total of  16,000  from holding Japfa Comfeed Indonesia or generate 9.36% return on investment over 90 days.

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

XL Axiata Tbk  vs.  Japfa Comfeed Indonesia

XL Axiata Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Japfa Comfeed Indonesia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Japfa Comfeed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XL Axiata and Japfa Comfeed

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

The idea behind XL Axiata Tbk and Japfa Comfeed Indonesia 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.