Correlation Between Citigroup and TIM Participacoes

Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and TIM Participacoes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and TIM Participacoes SA, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of TIM Participacoes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and TIM Participacoes.

Diversification Opportunities for Citigroup and TIM Participacoes

0.7

Correlation Coefficient

Citigroup  TIM Participacoes

Poor diversification

The 3 months correlation between Citigroup and TIM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TIM Participacoes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIM Participacoes and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and TIM Participacoes go up and down completely randomly.

Pair Corralation between Citigroup and TIM Participacoes

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.77 times more return on investment than TIM Participacoes. However, Citigroup is 1.29 times less risky than TIM Participacoes. It trades about 0.37 of its potential returns per unit of risk. TIM Participacoes SA is currently generating about 0.07 per unit of risk. If you would invest  6,833  in Citigroup on April 29, 2025 and sell it today you would earn a total of  2,722  from holding Citigroup or generate 39.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  TIM Participacoes SA

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

TIM Participacoes

Risk-Adjusted Performance

Modest

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 uncertain primary indicators, TIM Participacoes may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Citigroup and TIM Participacoes

The main advantage of trading using opposite Citigroup and TIM Participacoes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.