Correlation Between NYSE Composite and XL Axiata

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

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

Diversification Opportunities for NYSE Composite and XL Axiata

-0.29

Correlation Coefficient

NYSE Composite  XL Axiata

Very good diversification

The 3 months correlation between NYSE and PTXKY is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and XL Axiata go up and down completely randomly.

Pair Corralation between NYSE Composite and XL Axiata

Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.25 times less return on investment than XL Axiata. But when comparing it to its historical volatility, NYSE Composite is 6.84 times less risky than XL Axiata. It trades about 0.08 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  253.00  in XL Axiata Tbk on September 26, 2024 and sell it today you would earn a total of  22.00  from holding XL Axiata Tbk or generate 8.7% return on investment over 90 days.

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

NYSE Composite  vs.  XL Axiata Tbk

Pair Trading with NYSE Composite and XL Axiata

The main advantage of trading using opposite NYSE Composite and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.