Correlation Between Telia Company and TIM Participacoes

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

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

Diversification Opportunities for Telia Company and TIM Participacoes

-0.25

Correlation Coefficient

Telia Company  TIM Participacoes

Very good diversification

The 3 months correlation between Telia and TIM is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Telia Company 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 Telia Company AB are associated (or correlated) with TIM Participacoes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIM Participacoes has no effect on the direction of Telia Company i.e., Telia Company and TIM Participacoes go up and down completely randomly.

Pair Corralation between Telia Company and TIM Participacoes

Assuming the 90 days horizon Telia Company AB is expected to generate 0.22 times more return on investment than TIM Participacoes. However, Telia Company AB is 4.62 times less risky than TIM Participacoes. It trades about 0.22 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.04 per unit of risk. If you would invest  491.00  in Telia Company AB on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Telia Company AB or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.05%
Values	Daily Returns

Telia Company AB  vs.  TIM Participacoes SA

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Telia Company and TIM Participacoes

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

The idea behind Telia Company AB and TIM Participacoes 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.