Correlation Between Microsoft and Tema ETF

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

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

Diversification Opportunities for Microsoft and Tema ETF

0.05

Correlation Coefficient

Microsoft  Tema ETF

Significant diversification

The 3 months correlation between Microsoft and Tema is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Tema ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tema ETF Trust and Microsoft 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 Microsoft are associated (or correlated) with Tema ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tema ETF Trust has no effect on the direction of Microsoft i.e., Microsoft and Tema ETF go up and down completely randomly.

Pair Corralation between Microsoft and Tema ETF

Given the investment horizon of 90 days Microsoft is expected to under-perform the Tema ETF. In addition to that, Microsoft is 1.42 times more volatile than Tema ETF Trust. It trades about -0.08 of its total potential returns per unit of risk. Tema ETF Trust is currently generating about -0.04 per unit of volatility. If you would invest  2,209  in Tema ETF Trust on December 28, 2024 and sell it today you would lose (68.00) from holding Tema ETF Trust or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Tema ETF Trust

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with Microsoft and Tema ETF

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

The idea behind Microsoft and Tema ETF Trust 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.