Correlation Between Telecom Italia and TIM Participacoes

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

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

Diversification Opportunities for Telecom Italia and TIM Participacoes

0.0

Correlation Coefficient

Telecom Italia  TIM Participacoes

Pay attention - limited upside

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

Pair Corralation between Telecom Italia and TIM Participacoes

If you would invest  28.00  in Telecom Italia SpA on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Telecom Italia SpA or generate 0.0% return on investment over 90 days.

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

Telecom Italia SpA  vs.  TIM Participacoes SA

Telecom Italia SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecom Italia SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Telecom Italia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Telecom Italia and TIM Participacoes

The main advantage of trading using opposite Telecom Italia and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia 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 Telecom Italia SpA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.