Correlation Between XL Axiata and Link Net

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

Diversification Opportunities for XL Axiata and Link Net

0.32

Correlation Coefficient

XL Axiata  Link Net

Weak diversification

The 3 months correlation between EXCL and Link is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Link Net Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Link Net 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 Link Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Link Net Tbk has no effect on the direction of XL Axiata i.e., XL Axiata and Link Net go up and down completely randomly.

Pair Corralation between XL Axiata and Link Net

Assuming the 90 days trading horizon XL Axiata is expected to generate 34.03 times less return on investment than Link Net. But when comparing it to its historical volatility, XL Axiata Tbk is 8.43 times less risky than Link Net. It trades about 0.03 of its potential returns per unit of risk. Link Net Tbk is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  120,000  in Link Net Tbk on December 29, 2024 and sell it today you would earn a total of  58,500  from holding Link Net Tbk or generate 48.75% return on investment over 90 days.

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

XL Axiata Tbk  vs.  Link Net 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.

Link Net Tbk

Risk-Adjusted Performance

OK

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

Pair Trading with XL Axiata and Link Net

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

The idea behind XL Axiata Tbk and Link Net 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.