Correlation Between Tidal Trust and Virtus LifeSci

Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Virtus LifeSci 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 Tidal Trust and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tidal Trust II and Virtus LifeSci Biotech, you can compare the effects of market volatilities on Tidal Trust and Virtus LifeSci 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 Tidal Trust with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Virtus LifeSci.

Diversification Opportunities for Tidal Trust and Virtus LifeSci

-0.48

Correlation Coefficient

Tidal Trust  Virtus LifeSci

Very good diversification

The 3 months correlation between Tidal and Virtus is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Virtus LifeSci Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus LifeSci Biotech and Tidal Trust 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 Tidal Trust II are associated (or correlated) with Virtus LifeSci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus LifeSci Biotech has no effect on the direction of Tidal Trust i.e., Tidal Trust and Virtus LifeSci go up and down completely randomly.

Pair Corralation between Tidal Trust and Virtus LifeSci

Given the investment horizon of 90 days Tidal Trust II is expected to generate 0.55 times more return on investment than Virtus LifeSci. However, Tidal Trust II is 1.81 times less risky than Virtus LifeSci. It trades about 0.17 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.15 per unit of risk. If you would invest  2,016  in Tidal Trust II on December 28, 2024 and sell it today you would earn a total of  179.00  from holding Tidal Trust II or generate 8.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

Tidal Trust II  vs.  Virtus LifeSci Biotech

Tidal Trust II

Risk-Adjusted Performance

Good

Over the last 90 days Tidal Trust II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating basic indicators, Tidal Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Virtus LifeSci Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Tidal Trust and Virtus LifeSci

The main advantage of trading using opposite Tidal Trust and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Virtus LifeSci 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 Virtus LifeSci will offset losses from the drop in Virtus LifeSci's long position.

The idea behind Tidal Trust II and Virtus LifeSci Biotech 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..