Correlation Between TIM Participacoes and CF Industries

Can any of the company-specific risk be diversified away by investing in both TIM Participacoes and CF Industries 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 CF Industries 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 CF Industries Holdings, you can compare the effects of market volatilities on TIM Participacoes and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of TIM Participacoes and CF Industries.

Diversification Opportunities for TIM Participacoes and CF Industries

0.77

Correlation Coefficient

TIM Participacoes  CF Industries

Poor diversification

The 3 months correlation between TIM and CF Industries is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and CF Industries go up and down completely randomly.

Pair Corralation between TIM Participacoes and CF Industries

Given the investment horizon of 90 days TIM Participacoes is expected to generate 1.62 times less return on investment than CF Industries. In addition to that, TIM Participacoes is 1.02 times more volatile than CF Industries Holdings. It trades about 0.09 of its total potential returns per unit of risk. CF Industries Holdings is currently generating about 0.14 per unit of volatility. If you would invest  7,916  in CF Industries Holdings on May 1, 2025 and sell it today you would earn a total of  1,348  from holding CF Industries Holdings or generate 17.03% return on investment over 90 days.

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

TIM Participacoes SA  vs.  CF Industries Holdings

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 6 (%) 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.

CF Industries Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TIM Participacoes and CF Industries

The main advantage of trading using opposite TIM Participacoes and CF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TIM Participacoes position performs unexpectedly, CF Industries 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 CF Industries will offset losses from the drop in CF Industries' long position.

The idea behind TIM Participacoes SA and CF Industries Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.