Correlation Between Gogo and TIM Participacoes

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

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

Diversification Opportunities for Gogo and TIM Participacoes

-0.67

Correlation Coefficient

Gogo  TIM Participacoes

Excellent diversification

The 3 months correlation between Gogo and TIM is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gogo Inc and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Gogo 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 Gogo Inc are associated (or correlated) with TIM Participacoes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIM Participacoes has no effect on the direction of Gogo i.e., Gogo and TIM Participacoes go up and down completely randomly.

Pair Corralation between Gogo and TIM Participacoes

Given the investment horizon of 90 days Gogo Inc is expected to generate 2.05 times more return on investment than TIM Participacoes. However, Gogo is 2.05 times more volatile than TIM Participacoes SA. It trades about -0.01 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about -0.04 per unit of risk. If you would invest  1,050  in Gogo Inc on September 15, 2024 and sell it today you would lose (260.00) from holding Gogo Inc or give up 24.76% of portfolio value over 90 days.

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

Gogo Inc  vs.  TIM Participacoes SA

Gogo Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gogo Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Gogo displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gogo and TIM Participacoes

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

The idea behind Gogo Inc and TIM Participacoes 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.