Correlation Between Pakuwon Jati and XL Axiata

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

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

Diversification Opportunities for Pakuwon Jati and XL Axiata

0.82

Correlation Coefficient

Pakuwon Jati  XL Axiata

Very poor diversification

The 3 months correlation between Pakuwon and EXCL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pakuwon Jati Tbk 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 Pakuwon Jati 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 Pakuwon Jati Tbk 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 Pakuwon Jati i.e., Pakuwon Jati and XL Axiata go up and down completely randomly.

Pair Corralation between Pakuwon Jati and XL Axiata

Assuming the 90 days trading horizon Pakuwon Jati Tbk is expected to under-perform the XL Axiata. In addition to that, Pakuwon Jati is 1.8 times more volatile than XL Axiata Tbk. It trades about -0.29 of its total potential returns per unit of risk. XL Axiata Tbk is currently generating about -0.07 per unit of volatility. If you would invest  226,000  in XL Axiata Tbk on August 31, 2024 and sell it today you would lose (4,000) from holding XL Axiata Tbk or give up 1.77% of portfolio value over 90 days.

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

Pakuwon Jati Tbk  vs.  XL Axiata Tbk

Pakuwon Jati Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pakuwon Jati Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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. 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.

Pair Trading with Pakuwon Jati and XL Axiata

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

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.