Correlation Between TIM SA and Vodafone Group

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

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

Diversification Opportunities for TIM SA and Vodafone Group

0.22

Correlation Coefficient

TIM SA  Vodafone Group

Modest diversification

The 3 months correlation between TIM and Vodafone is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TIM SA and Vodafone Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group Public 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group Public has no effect on the direction of TIM SA i.e., TIM SA and Vodafone Group go up and down completely randomly.

Pair Corralation between TIM SA and Vodafone Group

Assuming the 90 days trading horizon TIM SA is expected to under-perform the Vodafone Group. But the stock apears to be less risky and, when comparing its historical volatility, TIM SA is 1.11 times less risky than Vodafone Group. The stock trades about -0.21 of its potential returns per unit of risk. The Vodafone Group Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,546  in Vodafone Group Public on September 23, 2024 and sell it today you would earn a total of  10.00  from holding Vodafone Group Public or generate 0.39% return on investment over 90 days.

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

TIM SA  vs.  Vodafone Group Public

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Vodafone Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vodafone Group 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 SA and Vodafone Group

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

The idea behind TIM SA and Vodafone Group Public 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.