Correlation Between Tema ETF and First Trust

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

By analyzing existing cross correlation between Tema ETF Trust and First Trust Active, you can compare the effects of market volatilities on Tema ETF and First Trust 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 Tema ETF with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tema ETF and First Trust.

Diversification Opportunities for Tema ETF and First Trust

-0.13

Correlation Coefficient

Tema ETF  First Trust

Good diversification

The 3 months correlation between Tema and First is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tema ETF Trust and First Trust Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Active and Tema ETF 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 Tema ETF Trust are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Active has no effect on the direction of Tema ETF i.e., Tema ETF and First Trust go up and down completely randomly.

Pair Corralation between Tema ETF and First Trust

Considering the 90-day investment horizon Tema ETF Trust is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Tema ETF Trust is 1.06 times less risky than First Trust. The etf trades about -0.01 of its potential returns per unit of risk. The First Trust Active is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,435  in First Trust Active on October 24, 2024 and sell it today you would earn a total of  914.00  from holding First Trust Active or generate 37.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.23%
Values	Daily Returns

Tema ETF Trust  vs.  First Trust Active

Tema ETF Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tema ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tema ETF is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Trust Active

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Active are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tema ETF and First Trust

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

The idea behind Tema ETF Trust and First Trust Active 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.