Correlation Between Ford and TIM Participacoes
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and TIM Participacoes SA, you can compare the effects of market volatilities on Ford 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 Ford with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and TIM Participacoes.
Diversification Opportunities for Ford and TIM Participacoes
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and TIM is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Ford 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 Ford Motor 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 Ford i.e., Ford and TIM Participacoes go up and down completely randomly.
Pair Corralation between Ford and TIM Participacoes
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.32 times more return on investment than TIM Participacoes. However, Ford is 1.32 times more volatile than TIM Participacoes SA. It trades about 0.08 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about -0.28 per unit of risk. If you would invest 1,042 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 68.00 from holding Ford Motor or generate 6.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. TIM Participacoes SA
Performance |
| Timeline |
| Ford Motor |
| TIM Participacoes |
Ford and TIM Participacoes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and TIM Participacoes
The main advantage of trading using opposite Ford and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| TIM Participacoes vs. SK Telecom Co | TIM Participacoes vs. PLDT Inc ADR | TIM Participacoes vs. Liberty Broadband Srs | TIM Participacoes vs. Liberty Broadband Srs |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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