Correlation Between Sumitomo Mitsui and XL Axiata

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

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

Diversification Opportunities for Sumitomo Mitsui and XL Axiata

-0.36

Correlation Coefficient

Sumitomo Mitsui  XL Axiata

Very good diversification

The 3 months correlation between Sumitomo and PTXKY is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial 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 Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 Sumitomo Mitsui i.e., Sumitomo Mitsui and XL Axiata go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and XL Axiata

Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to generate 1.12 times more return on investment than XL Axiata. However, Sumitomo Mitsui is 1.12 times more volatile than XL Axiata Tbk. It trades about 0.09 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.0 per unit of risk. If you would invest  1,967  in Sumitomo Mitsui Financial on September 25, 2024 and sell it today you would earn a total of  483.00  from holding Sumitomo Mitsui Financial or generate 24.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  XL Axiata Tbk

Sumitomo Mitsui Financial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sumitomo Mitsui and XL Axiata

The main advantage of trading using opposite Sumitomo Mitsui and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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 Sumitomo Mitsui Financial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.