Correlation Between XL Axiata and TIM Participacoes

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

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

Diversification Opportunities for XL Axiata and TIM Participacoes

0.06

Correlation Coefficient

XL Axiata  TIM Participacoes

Significant diversification

The 3 months correlation between PTXKY and TIM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding XL Axiata Tbk and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and XL Axiata 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 XL Axiata Tbk 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 XL Axiata i.e., XL Axiata and TIM Participacoes go up and down completely randomly.

Pair Corralation between XL Axiata and TIM Participacoes

Assuming the 90 days horizon XL Axiata Tbk is expected to generate 2.4 times more return on investment than TIM Participacoes. However, XL Axiata is 2.4 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 -0.21 per unit of risk. If you would invest  294.00  in XL Axiata Tbk on October 14, 2024 and sell it today you would lose (29.00) from holding XL Axiata Tbk or give up 9.86% of portfolio value over 90 days.

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

XL Axiata Tbk  vs.  TIM Participacoes SA

XL Axiata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, XL Axiata is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with XL Axiata and TIM Participacoes

The main advantage of trading using opposite XL Axiata and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XL Axiata 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 XL Axiata Tbk 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.