Correlation Between TIM Participacoes and Select Energy

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

Diversification Opportunities for TIM Participacoes and Select Energy

0.51

Correlation Coefficient

TIM Participacoes  Select Energy

Very weak diversification

The 3 months correlation between TIM and Select is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TIM Participacoes SA and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of TIM Participacoes i.e., TIM Participacoes and Select Energy go up and down completely randomly.

Pair Corralation between TIM Participacoes and Select Energy

Given the investment horizon of 90 days TIM Participacoes is expected to generate 1.89 times less return on investment than Select Energy. But when comparing it to its historical volatility, TIM Participacoes SA is 1.41 times less risky than Select Energy. It trades about 0.11 of its potential returns per unit of risk. Select Energy Services is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  730.00  in Select Energy Services on May 7, 2025 and sell it today you would earn a total of  172.00  from holding Select Energy Services or generate 23.56% return on investment over 90 days.

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

TIM Participacoes SA  vs.  Select Energy Services

TIM Participacoes

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in TIM Participacoes SA are ranked lower than 8 (%) 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 September 2025.

Select Energy Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Select Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TIM Participacoes and Select Energy

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

The idea behind TIM Participacoes SA and Select Energy Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.