Correlation Between Partner Communications and TIM Participacoes

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

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

Diversification Opportunities for Partner Communications and TIM Participacoes

0.3

Correlation Coefficient

Partner Communications  TIM Participacoes

Weak diversification

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

Pair Corralation between Partner Communications and TIM Participacoes

Assuming the 90 days horizon Partner Communications is expected to generate 2.73 times more return on investment than TIM Participacoes. However, Partner Communications is 2.73 times more volatile than TIM Participacoes SA. It trades about 0.12 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.24 per unit of risk. If you would invest  498.00  in Partner Communications on December 28, 2024 and sell it today you would earn a total of  204.00  from holding Partner Communications or generate 40.96% return on investment over 90 days.

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

Partner Communications  vs.  TIM Participacoes SA

Partner Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Partner Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Partner Communications reported solid returns over the last few months and may actually be approaching a breakup point.

TIM Participacoes

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, TIM Participacoes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Partner Communications and TIM Participacoes

The main advantage of trading using opposite Partner Communications and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Partner Communications 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 Partner Communications 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.