Correlation Between ETRACS Monthly and Tema ETF

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

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

Diversification Opportunities for ETRACS Monthly and Tema ETF

0.93

Correlation Coefficient

ETRACS Monthly  Tema ETF

Almost no diversification

The 3 months correlation between ETRACS and Tema is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay 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 ETRACS Monthly 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 ETRACS Monthly Pay 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 ETRACS Monthly i.e., ETRACS Monthly and Tema ETF go up and down completely randomly.

Pair Corralation between ETRACS Monthly and Tema ETF

Given the investment horizon of 90 days ETRACS Monthly Pay is expected to generate 1.24 times more return on investment than Tema ETF. However, ETRACS Monthly is 1.24 times more volatile than Tema ETF Trust. It trades about -0.03 of its potential returns per unit of risk. Tema ETF Trust is currently generating about -0.06 per unit of risk. If you would invest  1,943  in ETRACS Monthly Pay on February 3, 2025 and sell it today you would lose (118.00) from holding ETRACS Monthly Pay or give up 6.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ETRACS Monthly Pay  vs.  Tema ETF Trust

ETRACS Monthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS Monthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tema ETF Trust

Risk-Adjusted Performance

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 latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ETRACS Monthly and Tema ETF

The main advantage of trading using opposite ETRACS Monthly and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Monthly 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 ETRACS Monthly Pay 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.