Correlation Between TIM Participacoes and XL Axiata

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

Diversification Opportunities for TIM Participacoes and XL Axiata

0.06

Correlation Coefficient

TIM Participacoes  XL Axiata

Significant diversification

The 3 months correlation between TIM and PTXKY is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and XL Axiata Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XL Axiata Tbk 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 XL Axiata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XL Axiata Tbk has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and XL Axiata go up and down completely randomly.

Pair Corralation between TIM Participacoes and XL Axiata

Given the investment horizon of 90 days TIM Participacoes SA is expected to under-perform the XL Axiata. But the stock apears to be less risky and, when comparing its historical volatility, TIM Participacoes SA is 2.4 times less risky than XL Axiata. The stock trades about -0.21 of its potential returns per unit of risk. The XL Axiata Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  294.00  in XL Axiata Tbk on October 14, 2024 and sell it today you would lose (29.00) from holding XL Axiata Tbk or give up 9.86% of portfolio value over 90 days.

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

TIM Participacoes SA  vs.  XL Axiata Tbk

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.

XL Axiata Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XL Axiata Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, XL Axiata is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TIM Participacoes and XL Axiata

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

The idea behind TIM Participacoes SA and XL Axiata Tbk 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.