Correlation Between Tema ETF and IShares MSCI

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

Diversification Opportunities for Tema ETF and IShares MSCI

0.09

Correlation Coefficient

Tema ETF  IShares MSCI

Significant diversification

The 3 months correlation between Tema and IShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tema ETF Trust and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Tema ETF i.e., Tema ETF and IShares MSCI go up and down completely randomly.

Pair Corralation between Tema ETF and IShares MSCI

Considering the 90-day investment horizon Tema ETF Trust is expected to under-perform the IShares MSCI. In addition to that, Tema ETF is 1.34 times more volatile than iShares MSCI EAFE. It trades about -0.03 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.27 per unit of volatility. If you would invest  5,239  in iShares MSCI EAFE on December 28, 2024 and sell it today you would earn a total of  743.00  from holding iShares MSCI EAFE or generate 14.18% 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.  iShares MSCI EAFE

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 recent stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, IShares MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tema ETF and IShares MSCI

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

The idea behind Tema ETF Trust and iShares MSCI EAFE 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.