Correlation Between SK Telecom and TIM Participacoes
Can any of the company-specific risk be diversified away by investing in both SK Telecom 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 SK Telecom and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Telecom Co and TIM Participacoes SA, you can compare the effects of market volatilities on SK Telecom 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 SK Telecom with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Telecom and TIM Participacoes.
Diversification Opportunities for SK Telecom and TIM Participacoes
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SKM and TIM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and SK Telecom 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 SK Telecom Co 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 SK Telecom i.e., SK Telecom and TIM Participacoes go up and down completely randomly.
Pair Corralation between SK Telecom and TIM Participacoes
Considering the 90-day investment horizon SK Telecom Co is expected to generate 0.67 times more return on investment than TIM Participacoes. However, SK Telecom Co is 1.49 times less risky than TIM Participacoes. It trades about 0.03 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 1,989 in SK Telecom Co on October 20, 2024 and sell it today you would earn a total of 149.00 from holding SK Telecom Co or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Telecom Co vs. TIM Participacoes SA
Performance |
| Timeline |
| SK Telecom |
| TIM Participacoes |
SK Telecom and TIM Participacoes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Telecom and TIM Participacoes
The main advantage of trading using opposite SK Telecom and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom 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.| SK Telecom vs. TIM Participacoes SA | SK Telecom vs. PLDT Inc ADR | SK Telecom vs. Liberty Broadband Srs | SK Telecom vs. Liberty Broadband Srs |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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