Correlation Between Liberty Broadband and TIM Participacoes

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

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

Diversification Opportunities for Liberty Broadband and TIM Participacoes

0.05

Correlation Coefficient

Liberty Broadband  TIM Participacoes

Significant diversification

The 3 months correlation between Liberty and TIM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Corp and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Liberty Broadband 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 Liberty Broadband Corp 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 Liberty Broadband i.e., Liberty Broadband and TIM Participacoes go up and down completely randomly.

Pair Corralation between Liberty Broadband and TIM Participacoes

Assuming the 90 days horizon Liberty Broadband Corp is expected to generate 0.38 times more return on investment than TIM Participacoes. However, Liberty Broadband Corp is 2.65 times less risky than TIM Participacoes. It trades about 0.07 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about -0.18 per unit of risk. If you would invest  2,335  in Liberty Broadband Corp on September 3, 2024 and sell it today you would earn a total of  65.00  from holding Liberty Broadband Corp or generate 2.78% return on investment over 90 days.

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

Liberty Broadband Corp  vs.  TIM Participacoes SA

Liberty Broadband Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 Liberty Broadband and TIM Participacoes

The main advantage of trading using opposite Liberty Broadband and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband 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 Liberty Broadband Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.