Correlation Between TIM Participacoes and China Tontine

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

Diversification Opportunities for TIM Participacoes and China Tontine

TIMChinaDiversified AwayTIMChinaDiversified Away100%
0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between TIM and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and China Tontine Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tontine Wines and TIM Participacoes 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 TIM Participacoes SA are associated (or correlated) with China Tontine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tontine Wines has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and China Tontine go up and down completely randomly.

Pair Corralation between TIM Participacoes and China Tontine

Given the investment horizon of 90 days TIM Participacoes SA is expected to under-perform the China Tontine. But the stock apears to be less risky and, when comparing its historical volatility, TIM Participacoes SA is 4.08 times less risky than China Tontine. The stock trades about -0.02 of its potential returns per unit of risk. The China Tontine Wines is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.30  in China Tontine Wines on November 24, 2024 and sell it today you would earn a total of  3.80  from holding China Tontine Wines or generate 115.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy98.09%
ValuesDaily Returns

TIM Participacoes SA  vs.  China Tontine Wines

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15TIMB CATWF
       Timeline  
TIM Participacoes 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, TIM Participacoes may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.51212.51313.51414.51515.5
China Tontine Wines 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0710.0715

TIM Participacoes and China Tontine Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.15-5.35-3.56-1.760.01.843.685.537.37 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15TIMB CATWF
       Returns  

Pair Trading with TIM Participacoes and China Tontine

The main advantage of trading using opposite TIM Participacoes and China Tontine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TIM Participacoes position performs unexpectedly, China Tontine 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 China Tontine will offset losses from the drop in China Tontine's long position.
The idea behind TIM Participacoes SA and China Tontine Wines 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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