Correlation Between XL Axiata and Telenor ASA

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

Diversification Opportunities for XL Axiata and Telenor ASA

0.19

Correlation Coefficient

XL Axiata  Telenor ASA

Average diversification

The 3 months correlation between PTXKY and Telenor is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of XL Axiata i.e., XL Axiata and Telenor ASA go up and down completely randomly.

Pair Corralation between XL Axiata and Telenor ASA

Assuming the 90 days horizon XL Axiata Tbk is expected to generate 4.32 times more return on investment than Telenor ASA. However, XL Axiata is 4.32 times more volatile than Telenor ASA ADR. It trades about 0.09 of its potential returns per unit of risk. Telenor ASA ADR is currently generating about -0.31 per unit of risk. If you would invest  256.00  in XL Axiata Tbk on September 25, 2024 and sell it today you would earn a total of  19.00  from holding XL Axiata Tbk or generate 7.42% 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.  Telenor ASA ADR

XL Axiata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, XL Axiata is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with XL Axiata and Telenor ASA

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

The idea behind XL Axiata Tbk and Telenor ASA ADR 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.