Correlation Between Tema ETF and Invesco DWA

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

Diversification Opportunities for Tema ETF and Invesco DWA

-0.39

Correlation Coefficient

Tema ETF  Invesco DWA

Very good diversification

The 3 months correlation between Tema and Invesco is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tema ETF Trust and Invesco DWA Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Consumer 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Consumer has no effect on the direction of Tema ETF i.e., Tema ETF and Invesco DWA go up and down completely randomly.

Pair Corralation between Tema ETF and Invesco DWA

Considering the 90-day investment horizon Tema ETF is expected to generate 14.23 times less return on investment than Invesco DWA. In addition to that, Tema ETF is 1.18 times more volatile than Invesco DWA Consumer. It trades about 0.03 of its total potential returns per unit of risk. Invesco DWA Consumer is currently generating about 0.46 per unit of volatility. If you would invest  10,255  in Invesco DWA Consumer on September 4, 2024 and sell it today you would earn a total of  797.00  from holding Invesco DWA Consumer or generate 7.77% return on investment over 90 days.

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

Tema ETF Trust  vs.  Invesco DWA Consumer

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.

Invesco DWA Consumer

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Consumer are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Invesco DWA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tema ETF and Invesco DWA

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

The idea behind Tema ETF Trust and Invesco DWA Consumer 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.