Correlation Between Telenor ASA and TIM Participacoes

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Can any of the company-specific risk be diversified away by investing in both Telenor ASA 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 Telenor ASA and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telenor ASA and TIM Participacoes SA, you can compare the effects of market volatilities on Telenor ASA 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 Telenor ASA with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and TIM Participacoes.

Diversification Opportunities for Telenor ASA and TIM Participacoes

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Telenor and TIM is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Telenor ASA 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 Telenor ASA 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 Telenor ASA i.e., Telenor ASA and TIM Participacoes go up and down completely randomly.

Pair Corralation between Telenor ASA and TIM Participacoes

Assuming the 90 days horizon Telenor ASA is expected to under-perform the TIM Participacoes. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telenor ASA is 1.13 times less risky than TIM Participacoes. The pink sheet trades about -0.21 of its potential returns per unit of risk. The TIM Participacoes SA is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,439  in TIM Participacoes SA on August 31, 2024 and sell it today you would lose (71.00) from holding TIM Participacoes SA or give up 4.93% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Telenor ASA  vs.  TIM Participacoes SA

 Performance 
       Timeline  
Telenor ASA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Telenor ASA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
TIM Participacoes 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 unfluctuating performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Telenor ASA and TIM Participacoes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telenor ASA and TIM Participacoes

The main advantage of trading using opposite Telenor ASA and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA 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 Telenor ASA 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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