Correlation Between Vodafone Group and XL Axiata

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

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

Diversification Opportunities for Vodafone Group and XL Axiata

0.45

Correlation Coefficient

Vodafone Group  XL Axiata

Very weak diversification

The 3 months correlation between Vodafone and PTXKY is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and XL Axiata go up and down completely randomly.

Pair Corralation between Vodafone Group and XL Axiata

Assuming the 90 days horizon Vodafone Group is expected to generate 1.65 times less return on investment than XL Axiata. In addition to that, Vodafone Group is 1.12 times more volatile than XL Axiata Tbk. It trades about 0.02 of its total potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.03 per unit of volatility. If you would invest  237.00  in XL Axiata Tbk on October 5, 2024 and sell it today you would earn a total of  49.00  from holding XL Axiata Tbk or generate 20.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.86%
Values	Daily Returns

Vodafone Group PLC  vs.  XL Axiata Tbk

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

XL Axiata Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XL Axiata Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, XL Axiata may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vodafone Group and XL Axiata

The main advantage of trading using opposite Vodafone Group and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.