Correlation Between Tele2 AB and TIM Participacoes

Can any of the company-specific risk be diversified away by investing in both Tele2 AB 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 Tele2 AB and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tele2 AB and TIM Participacoes SA, you can compare the effects of market volatilities on Tele2 AB 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 Tele2 AB with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and TIM Participacoes.

Diversification Opportunities for Tele2 AB and TIM Participacoes

0.75

Correlation Coefficient

Tele2 AB  TIM Participacoes

Poor diversification

The 3 months correlation between Tele2 and TIM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 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 Tele2 AB 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 Tele2 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 Tele2 AB i.e., Tele2 AB and TIM Participacoes go up and down completely randomly.

Pair Corralation between Tele2 AB and TIM Participacoes

Assuming the 90 days horizon Tele2 AB is expected to generate 1.43 times more return on investment than TIM Participacoes. However, Tele2 AB is 1.43 times more volatile than TIM Participacoes SA. It trades about 0.02 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about -0.06 per unit of risk. If you would invest  497.00  in Tele2 AB on September 26, 2024 and sell it today you would earn a total of  4.00  from holding Tele2 AB or generate 0.8% return on investment over 90 days.

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

Tele2 AB  vs.  TIM Participacoes SA

Tele2 AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tele2 AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 Tele2 AB and TIM Participacoes

The main advantage of trading using opposite Tele2 AB and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB 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 Tele2 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.