Correlation Between IShares MSCI and Tema ETF

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

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

Diversification Opportunities for IShares MSCI and Tema ETF

0.17

Correlation Coefficient

IShares MSCI  Tema ETF

Average diversification

The 3 months correlation between IShares and Tema is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China 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 IShares MSCI 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 iShares MSCI China 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 IShares MSCI i.e., IShares MSCI and Tema ETF go up and down completely randomly.

Pair Corralation between IShares MSCI and Tema ETF

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.08 times less return on investment than Tema ETF. In addition to that, IShares MSCI is 1.78 times more volatile than Tema ETF Trust. It trades about 0.05 of its total potential returns per unit of risk. Tema ETF Trust is currently generating about 0.1 per unit of volatility. If you would invest  3,451  in Tema ETF Trust on September 13, 2024 and sell it today you would earn a total of  567.00  from holding Tema ETF Trust or generate 16.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

iShares MSCI China  vs.  Tema ETF Trust

iShares MSCI China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tema ETF Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tema ETF Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Tema ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares MSCI and Tema ETF

The main advantage of trading using opposite IShares MSCI and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI China 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.