Correlation Between IShares Transportation and Tema ETF
Can any of the company-specific risk be diversified away by investing in both IShares Transportation 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 Transportation 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 Transportation Average and Tema ETF Trust, you can compare the effects of market volatilities on IShares Transportation 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 Transportation with a short position of Tema ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Transportation and Tema ETF.
Diversification Opportunities for IShares Transportation and Tema ETF
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Tema is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Transportation Average 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 Transportation 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 Transportation Average 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 Transportation i.e., IShares Transportation and Tema ETF go up and down completely randomly.
Pair Corralation between IShares Transportation and Tema ETF
Considering the 90-day investment horizon IShares Transportation is expected to generate 2.66 times less return on investment than Tema ETF. But when comparing it to its historical volatility, iShares Transportation Average is 1.09 times less risky than Tema ETF. It trades about 0.02 of its potential returns per unit of risk. Tema ETF Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,266 in Tema ETF Trust on November 3, 2024 and sell it today you would earn a total of 595.00 from holding Tema ETF Trust or generate 18.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
iShares Transportation Average vs. Tema ETF Trust
Performance |
| Timeline |
| iShares Transportation |
| Tema ETF Trust |
IShares Transportation and Tema ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Transportation and Tema ETF
The main advantage of trading using opposite IShares Transportation and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Transportation 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 Transportation Average 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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