Correlation Between TIM Participacoes and Telia Company

Can any of the company-specific risk be diversified away by investing in both TIM Participacoes and Telia Company 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 TIM Participacoes and Telia Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TIM Participacoes SA and Telia Company AB, you can compare the effects of market volatilities on TIM Participacoes and Telia Company 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 TIM Participacoes with a short position of Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of TIM Participacoes and Telia Company.

Diversification Opportunities for TIM Participacoes and Telia Company

0.27

Correlation Coefficient

TIM Participacoes  Telia Company

Modest diversification

The 3 months correlation between TIM and Telia is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company and TIM Participacoes 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 TIM Participacoes SA are associated (or correlated) with Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and Telia Company go up and down completely randomly.

Pair Corralation between TIM Participacoes and Telia Company

Given the investment horizon of 90 days TIM Participacoes SA is expected to generate 1.06 times more return on investment than Telia Company. However, TIM Participacoes is 1.06 times more volatile than Telia Company AB. It trades about 0.04 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.1 per unit of risk. If you would invest  1,041  in TIM Participacoes SA on September 5, 2024 and sell it today you would earn a total of  267.00  from holding TIM Participacoes SA or generate 25.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	7.88%
Values	Daily Returns

TIM Participacoes SA  vs.  Telia Company AB

TIM Participacoes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TIM Participacoes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's primary indicators remain somewhat 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.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TIM Participacoes and Telia Company

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

The idea behind TIM Participacoes SA and Telia Company AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.