Correlation Between SPDR SP and Tema ETF

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

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

Diversification Opportunities for SPDR SP and Tema ETF

0.87

Correlation Coefficient

SPDR SP  Tema ETF

Very poor diversification

The 3 months correlation between SPDR and Tema is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Retail 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 SPDR SP 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 SPDR SP Retail 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 SPDR SP i.e., SPDR SP and Tema ETF go up and down completely randomly.

Pair Corralation between SPDR SP and Tema ETF

Considering the 90-day investment horizon SPDR SP is expected to generate 1.35 times less return on investment than Tema ETF. In addition to that, SPDR SP is 1.04 times more volatile than Tema ETF Trust. It trades about 0.25 of its total potential returns per unit of risk. Tema ETF Trust is currently generating about 0.36 per unit of volatility. If you would invest  2,002  in Tema ETF Trust on February 9, 2025 and sell it today you would earn a total of  180.00  from holding Tema ETF Trust or generate 8.99% return on investment over 90 days.

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

SPDR SP Retail  vs.  Tema ETF Trust

SPDR SP Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

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 SPDR SP and Tema ETF

The main advantage of trading using opposite SPDR SP and Tema ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Retail 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.