Correlation Between TIM Participacoes and Liberty Broadband

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

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

Diversification Opportunities for TIM Participacoes and Liberty Broadband

-0.74

Correlation Coefficient

TIM Participacoes  Liberty Broadband

Pay attention - limited upside

The 3 months correlation between TIM and Liberty is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs and TIM Participacoes 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 TIM Participacoes SA are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and Liberty Broadband go up and down completely randomly.

Pair Corralation between TIM Participacoes and Liberty Broadband

Given the investment horizon of 90 days TIM Participacoes SA is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, TIM Participacoes SA is 1.94 times less risky than Liberty Broadband. The stock trades about -0.07 of its potential returns per unit of risk. The Liberty Broadband Srs is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,229  in Liberty Broadband Srs on September 3, 2024 and sell it today you would earn a total of  3,232  from holding Liberty Broadband Srs or generate 61.81% return on investment over 90 days.

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

TIM Participacoes SA  vs.  Liberty Broadband Srs

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.

Liberty Broadband Srs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Liberty Broadband disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TIM Participacoes and Liberty Broadband

The main advantage of trading using opposite TIM Participacoes and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TIM Participacoes position performs unexpectedly, Liberty Broadband 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 Liberty Broadband will offset losses from the drop in Liberty Broadband's long position.

The idea behind TIM Participacoes SA and Liberty Broadband Srs 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.