Correlation Between Vanguard and Tema ETF

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Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard and Tema ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP Mid Cap and Tema ETF Trust, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Tema ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Tema ETF.

Diversification Opportunities for Vanguard and Tema ETF

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Vanguard and Tema is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap 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 Vanguard 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 Vanguard SP Mid Cap 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 Vanguard i.e., Vanguard and Tema ETF go up and down completely randomly.

Pair Corralation between Vanguard and Tema ETF

Given the investment horizon of 90 days Vanguard is expected to generate 1.06 times less return on investment than Tema ETF. But when comparing it to its historical volatility, Vanguard SP Mid Cap is 1.36 times less risky than Tema ETF. It trades about 0.25 of its potential returns per unit of risk. Tema ETF Trust is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,843  in Tema ETF Trust on August 27, 2024 and sell it today you would earn a total of  260.00  from holding Tema ETF Trust or generate 6.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard SP Mid Cap  vs.  Tema ETF Trust

 Performance 
       Timeline  
Vanguard SP Mid 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Mid Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Tema ETF Trust 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Tema ETF Trust are ranked lower than 11 (%) 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 December 2024.

Vanguard and Tema ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard and Tema ETF

The main advantage of trading using opposite Vanguard and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP Mid Cap 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.
Check out your portfolio center.
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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