Correlation Between Bank of America and TIM Participacoes
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and TIM Participacoes SA, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and TIM Participacoes.
Diversification Opportunities for Bank of America and TIM Participacoes
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and TIM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and TIM Participacoes go up and down completely randomly.
Pair Corralation between Bank of America and TIM Participacoes
Considering the 90-day investment horizon Bank of America is expected to generate 1.12 times less return on investment than TIM Participacoes. But when comparing it to its historical volatility, Bank of America is 2.2 times less risky than TIM Participacoes. It trades about 0.5 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,810 in TIM Participacoes SA on April 5, 2025 and sell it today you would earn a total of 207.00 from holding TIM Participacoes SA or generate 11.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. TIM Participacoes SA
Performance |
Timeline |
Bank of America |
TIM Participacoes |
Bank of America and TIM Participacoes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and TIM Participacoes
The main advantage of trading using opposite Bank of America and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.Bank of America vs. Barrick Mining | Bank of America vs. Olympic Steel | Bank of America vs. Morgan Advanced Materials | Bank of America vs. BTC Digital |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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