Correlation Between Tema ETF and Fidelity Momentum

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

Diversification Opportunities for Tema ETF and Fidelity Momentum

0.08

Correlation Coefficient

Tema ETF  Fidelity Momentum

Significant diversification

The 3 months correlation between Tema and Fidelity is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tema ETF Trust and Fidelity Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum Factor 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 Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum Factor has no effect on the direction of Tema ETF i.e., Tema ETF and Fidelity Momentum go up and down completely randomly.

Pair Corralation between Tema ETF and Fidelity Momentum

Considering the 90-day investment horizon Tema ETF is expected to generate 2.07 times less return on investment than Fidelity Momentum. But when comparing it to its historical volatility, Tema ETF Trust is 1.14 times less risky than Fidelity Momentum. It trades about 0.06 of its potential returns per unit of risk. Fidelity Momentum Factor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,709  in Fidelity Momentum Factor on October 23, 2024 and sell it today you would earn a total of  484.00  from holding Fidelity Momentum Factor or generate 7.21% 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.  Fidelity Momentum Factor

Tema ETF Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tema ETF Trust are ranked lower than 4 (%) 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.

Fidelity Momentum Factor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Momentum Factor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Fidelity Momentum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tema ETF and Fidelity Momentum

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

The idea behind Tema ETF Trust and Fidelity Momentum Factor 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.