Correlation Between Natura Co and TIM SA

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

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

Diversification Opportunities for Natura Co and TIM SA

-0.3

Correlation Coefficient

Natura Co  TIM SA

Very good diversification

The 3 months correlation between Natura and TIM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and TIM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM SA and Natura Co 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 Natura Co Holding 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 Natura Co i.e., Natura Co and TIM SA go up and down completely randomly.

Pair Corralation between Natura Co and TIM SA

Assuming the 90 days trading horizon Natura Co Holding is expected to under-perform the TIM SA. In addition to that, Natura Co is 2.45 times more volatile than TIM SA. It trades about -0.04 of its total potential returns per unit of risk. TIM SA is currently generating about 0.19 per unit of volatility. If you would invest  1,441  in TIM SA on December 30, 2024 and sell it today you would earn a total of  336.00  from holding TIM SA or generate 23.32% return on investment over 90 days.

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

Natura Co Holding  vs.  TIM SA

Natura Co Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TIM SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TIM SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TIM SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natura Co and TIM SA

The main advantage of trading using opposite Natura Co and TIM SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura Co 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 Natura Co Holding 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.