Correlation Between Invesco SP and Tema ETF

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

By analyzing existing cross correlation between Invesco SP 500 and Tema ETF Trust, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Tema ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Tema ETF.

Diversification Opportunities for Invesco SP and Tema ETF

-0.39

Correlation Coefficient

Invesco SP  Tema ETF

Very good diversification

The 3 months correlation between Invesco and Tema is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 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 Invesco SP 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 Invesco SP 500 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 Invesco SP i.e., Invesco SP and Tema ETF go up and down completely randomly.

Pair Corralation between Invesco SP and Tema ETF

Considering the 90-day investment horizon Invesco SP 500 is expected to generate 0.86 times more return on investment than Tema ETF. However, Invesco SP 500 is 1.16 times less risky than Tema ETF. It trades about 0.01 of its potential returns per unit of risk. Tema ETF Trust is currently generating about 0.01 per unit of risk. If you would invest  5,064  in Invesco SP 500 on September 24, 2024 and sell it today you would earn a total of  30.00  from holding Invesco SP 500 or generate 0.59% return on investment over 90 days.

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

Invesco SP 500  vs.  Tema ETF Trust

Invesco SP 500

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Tema ETF Trust

Risk-Adjusted Performance

0 of 100

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 Invesco SP and Tema ETF

The main advantage of trading using opposite Invesco SP and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP 500 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.