Correlation Between TIM Participacoes and Liberty Latin

Can any of the company-specific risk be diversified away by investing in both TIM Participacoes and Liberty Latin 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 Latin 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 Latin America, you can compare the effects of market volatilities on TIM Participacoes and Liberty Latin 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 Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of TIM Participacoes and Liberty Latin.

Diversification Opportunities for TIM Participacoes and Liberty Latin

0.51

Correlation Coefficient

TIM Participacoes  Liberty Latin

Very weak diversification

The 3 months correlation between TIM and Liberty is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America 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 Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and Liberty Latin go up and down completely randomly.

Pair Corralation between TIM Participacoes and Liberty Latin

Given the investment horizon of 90 days TIM Participacoes SA is expected to generate 0.82 times more return on investment than Liberty Latin. However, TIM Participacoes SA is 1.21 times less risky than Liberty Latin. It trades about 0.23 of its potential returns per unit of risk. Liberty Latin America is currently generating about 0.02 per unit of risk. If you would invest  1,165  in TIM Participacoes SA on December 28, 2024 and sell it today you would earn a total of  378.00  from holding TIM Participacoes SA or generate 32.45% return on investment over 90 days.

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

TIM Participacoes SA  vs.  Liberty Latin America

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.

Liberty Latin America

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Liberty Latin is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with TIM Participacoes and Liberty Latin

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

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