Correlation Between Radcom and TIM Participacoes

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

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

Diversification Opportunities for Radcom and TIM Participacoes

-0.72

Correlation Coefficient

Radcom  TIM Participacoes

Pay attention - limited upside

The 3 months correlation between Radcom and TIM is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Radcom 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 Radcom 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 Radcom i.e., Radcom and TIM Participacoes go up and down completely randomly.

Pair Corralation between Radcom and TIM Participacoes

Given the investment horizon of 90 days Radcom is expected to generate 1.93 times more return on investment than TIM Participacoes. However, Radcom is 1.93 times more volatile than TIM Participacoes SA. It trades about 0.11 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  974.00  in Radcom on September 2, 2024 and sell it today you would earn a total of  221.00  from holding Radcom or generate 22.69% return on investment over 90 days.

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

Radcom  vs.  TIM Participacoes SA

Radcom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Radcom and TIM Participacoes

The main advantage of trading using opposite Radcom and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..