Correlation Between MTN Group and XL Axiata

Can any of the company-specific risk be diversified away by investing in both MTN 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 MTN 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 MTN Group Ltd and XL Axiata Tbk, you can compare the effects of market volatilities on MTN 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 MTN Group with a short position of XL Axiata. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and XL Axiata.

Diversification Opportunities for MTN Group and XL Axiata

0.7

Correlation Coefficient

MTN Group  XL Axiata

Poor diversification

The 3 months correlation between MTN and PTXKY is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd 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 MTN 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 MTN Group Ltd 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 MTN Group i.e., MTN Group and XL Axiata go up and down completely randomly.

Pair Corralation between MTN Group and XL Axiata

Assuming the 90 days horizon MTN Group is expected to generate 1.37 times less return on investment than XL Axiata. But when comparing it to its historical volatility, MTN Group Ltd is 4.09 times less risky than XL Axiata. It trades about 0.25 of its potential returns per unit of risk. XL Axiata Tbk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  243.00  in XL Axiata Tbk on May 8, 2025 and sell it today you would earn a total of  60.00  from holding XL Axiata Tbk or generate 24.69% return on investment over 90 days.

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

MTN Group Ltd  vs.  XL Axiata Tbk

MTN Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MTN Group Ltd are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MTN Group showed solid returns over the last few months and may actually be approaching a breakup point.

XL Axiata Tbk

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in XL Axiata Tbk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, XL Axiata showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTN Group and XL Axiata

The main advantage of trading using opposite MTN Group and XL Axiata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN 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 MTN Group Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.