Correlation Between Vodafone Group and TIM Participacoes

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

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

Diversification Opportunities for Vodafone Group and TIM Participacoes

0.63

Correlation Coefficient

Vodafone Group  TIM Participacoes

Poor diversification

The 3 months correlation between Vodafone and TIM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and TIM Participacoes go up and down completely randomly.

Pair Corralation between Vodafone Group and TIM Participacoes

Considering the 90-day investment horizon Vodafone Group is expected to generate 2.69 times less return on investment than TIM Participacoes. But when comparing it to its historical volatility, Vodafone Group PLC is 1.33 times less risky than TIM Participacoes. It trades about 0.12 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,165  in TIM Participacoes SA on December 28, 2024 and sell it today you would earn a total of  394.00  from holding TIM Participacoes SA or generate 33.82% return on investment over 90 days.

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

Vodafone Group PLC  vs.  TIM Participacoes SA

Vodafone Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Vodafone Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TIM Participacoes

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, TIM Participacoes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vodafone Group and TIM Participacoes

The main advantage of trading using opposite Vodafone Group and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.