Correlation Between TIM SA and Telecomunicaes Brasileiras

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

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

Diversification Opportunities for TIM SA and Telecomunicaes Brasileiras

0.61

Correlation Coefficient

TIM SA  Telecomunicaes Brasileiras

Poor diversification

The 3 months correlation between TIM and Telecomunicaes is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding TIM SA and Telecomunicaes Brasileiras SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecomunicaes Brasileiras and TIM SA 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 SA are associated (or correlated) with Telecomunicaes Brasileiras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecomunicaes Brasileiras has no effect on the direction of TIM SA i.e., TIM SA and Telecomunicaes Brasileiras go up and down completely randomly.

Pair Corralation between TIM SA and Telecomunicaes Brasileiras

Assuming the 90 days trading horizon TIM SA is expected to under-perform the Telecomunicaes Brasileiras. But the stock apears to be less risky and, when comparing its historical volatility, TIM SA is 1.55 times less risky than Telecomunicaes Brasileiras. The stock trades about -0.1 of its potential returns per unit of risk. The Telecomunicaes Brasileiras SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,374  in Telecomunicaes Brasileiras SA on September 2, 2024 and sell it today you would lose (129.00) from holding Telecomunicaes Brasileiras SA or give up 9.39% of portfolio value over 90 days.

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

TIM SA  vs.  Telecomunicaes Brasileiras SA

TIM SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TIM SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Telecomunicaes Brasileiras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecomunicaes Brasileiras SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TIM SA and Telecomunicaes Brasileiras

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

The idea behind TIM SA and Telecomunicaes Brasileiras SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..