Correlation Between Telefnica Brasil and TIM SA

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

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

Diversification Opportunities for Telefnica Brasil and TIM SA

0.86

Correlation Coefficient

Telefnica Brasil  TIM SA

Very poor diversification

The 3 months correlation between Telefnica and TIM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica Brasil SA and TIM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM SA and Telefnica Brasil 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 Telefnica Brasil SA are associated (or correlated) with TIM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIM SA has no effect on the direction of Telefnica Brasil i.e., Telefnica Brasil and TIM SA go up and down completely randomly.

Pair Corralation between Telefnica Brasil and TIM SA

Assuming the 90 days trading horizon Telefnica Brasil SA is expected to generate 0.79 times more return on investment than TIM SA. However, Telefnica Brasil SA is 1.27 times less risky than TIM SA. It trades about -0.08 of its potential returns per unit of risk. TIM SA is currently generating about -0.11 per unit of risk. If you would invest  5,321  in Telefnica Brasil SA on September 3, 2024 and sell it today you would lose (369.00) from holding Telefnica Brasil SA or give up 6.93% of portfolio value over 90 days.

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

Telefnica Brasil SA  vs.  TIM SA

Telefnica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

TIM SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TIM SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Telefnica Brasil and TIM SA

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

The idea behind Telefnica Brasil SA and TIM SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.