Correlation Between TIM Participacoes and Lumen Technologies

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

Diversification Opportunities for TIM Participacoes and Lumen Technologies

-0.81

Correlation Coefficient

TIM Participacoes  Lumen Technologies

Pay attention - limited upside

The 3 months correlation between TIM and Lumen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and Lumen Technologies go up and down completely randomly.

Pair Corralation between TIM Participacoes and Lumen Technologies

Given the investment horizon of 90 days TIM Participacoes SA is expected to generate 0.52 times more return on investment than Lumen Technologies. However, TIM Participacoes SA is 1.94 times less risky than Lumen Technologies. It trades about 0.24 of its potential returns per unit of risk. Lumen Technologies is currently generating about -0.07 per unit of risk. If you would invest  1,157  in TIM Participacoes SA on December 27, 2024 and sell it today you would earn a total of  383.00  from holding TIM Participacoes SA or generate 33.1% return on investment over 90 days.

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

TIM Participacoes SA  vs.  Lumen Technologies

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 unfluctuating primary indicators, TIM Participacoes sustained solid returns over the last few months and may actually be approaching a breakup point.

Lumen Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with TIM Participacoes and Lumen Technologies

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

The idea behind TIM Participacoes SA and Lumen Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.