Correlation Between TIM Participacoes and MTN Group

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

Diversification Opportunities for TIM Participacoes and MTN Group

0.77

Correlation Coefficient

TIM Participacoes  MTN Group

Poor diversification

The 3 months correlation between TIM and MTN is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and MTN Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and MTN Group go up and down completely randomly.

Pair Corralation between TIM Participacoes and MTN Group

Given the investment horizon of 90 days TIM Participacoes SA is expected to generate 0.69 times more return on investment than MTN Group. However, TIM Participacoes SA is 1.44 times less risky than MTN Group. It trades about 0.03 of its potential returns per unit of risk. MTN Group Ltd is currently generating about -0.03 per unit of risk. If you would invest  986.00  in TIM Participacoes SA on September 26, 2024 and sell it today you would earn a total of  221.00  from holding TIM Participacoes SA or generate 22.41% return on investment over 90 days.

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

TIM Participacoes SA  vs.  MTN Group Ltd

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 inconsistent 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.

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Ltd 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 basic indicators remain fairly 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 TIM Participacoes and MTN Group

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

The idea behind TIM Participacoes SA and MTN Group Ltd 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.