Correlation Between Orange SA and TIM Participacoes

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

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

Diversification Opportunities for Orange SA and TIM Participacoes

0.0

Correlation Coefficient

Orange SA  TIM Participacoes

Pay attention - limited upside

The 3 months correlation between Orange and TIM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Orange SA ADR and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Orange SA 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 Orange SA ADR 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 Orange SA i.e., Orange SA and TIM Participacoes go up and down completely randomly.

Pair Corralation between Orange SA and TIM Participacoes

If you would invest  1,266  in TIM Participacoes SA on November 28, 2024 and sell it today you would earn a total of  210.00  from holding TIM Participacoes SA or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Orange SA ADR  vs.  TIM Participacoes SA

Orange SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Orange SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

TIM Participacoes

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, TIM Participacoes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange SA and TIM Participacoes

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

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.