Correlation Between Tidal Trust and Investment Managers

Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Investment Managers 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 Investment Managers 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 Investment Managers Series, you can compare the effects of market volatilities on Tidal Trust and Investment Managers 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 Investment Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Investment Managers.

Diversification Opportunities for Tidal Trust and Investment Managers

-0.5

Correlation Coefficient

Tidal Trust  Investment Managers

Very good diversification

The 3 months correlation between Tidal and Investment is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers 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 Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of Tidal Trust i.e., Tidal Trust and Investment Managers go up and down completely randomly.

Pair Corralation between Tidal Trust and Investment Managers

Given the investment horizon of 90 days Tidal Trust II is expected to generate 2.41 times more return on investment than Investment Managers. However, Tidal Trust is 2.41 times more volatile than Investment Managers Series. It trades about 0.06 of its potential returns per unit of risk. Investment Managers Series is currently generating about 0.0 per unit of risk. If you would invest  1,939  in Tidal Trust II on October 26, 2024 and sell it today you would earn a total of  94.00  from holding Tidal Trust II or generate 4.85% return on investment over 90 days.

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

Tidal Trust II  vs.  Investment Managers Series

Tidal Trust II

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Tidal Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment Managers Series has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Investment Managers is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tidal Trust and Investment Managers

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

The idea behind Tidal Trust II and Investment Managers Series 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.