Correlation Between Tema ETF and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both Tema ETF and WisdomTree International 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 WisdomTree International 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 WisdomTree International Equity, you can compare the effects of market volatilities on Tema ETF and WisdomTree International 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tema ETF and WisdomTree International.

Diversification Opportunities for Tema ETF and WisdomTree International

0.1

Correlation Coefficient

Tema ETF  WisdomTree International

Average diversification

The 3 months correlation between Tema and WisdomTree is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tema ETF Trust and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Tema ETF i.e., Tema ETF and WisdomTree International go up and down completely randomly.

Pair Corralation between Tema ETF and WisdomTree International

Considering the 90-day investment horizon Tema ETF Trust is expected to under-perform the WisdomTree International. In addition to that, Tema ETF is 1.4 times more volatile than WisdomTree International Equity. It trades about -0.05 of its total potential returns per unit of risk. WisdomTree International Equity is currently generating about 0.23 per unit of volatility. If you would invest  5,258  in WisdomTree International Equity on December 29, 2024 and sell it today you would earn a total of  617.00  from holding WisdomTree International Equity or generate 11.73% return on investment over 90 days.

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

Tema ETF Trust  vs.  WisdomTree International Equit

Tema ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tema ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tema ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Equity are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tema ETF and WisdomTree International

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

The idea behind Tema ETF Trust and WisdomTree International Equity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.