Correlation Between Tidal Trust and PIMCO ETF

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

Diversification Opportunities for Tidal Trust and PIMCO ETF

-0.28

Correlation Coefficient

Tidal Trust  PIMCO ETF

Very good diversification

The 3 months correlation between Tidal and PIMCO is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and PIMCO ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO ETF Trust 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 PIMCO ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO ETF Trust has no effect on the direction of Tidal Trust i.e., Tidal Trust and PIMCO ETF go up and down completely randomly.

Pair Corralation between Tidal Trust and PIMCO ETF

Given the investment horizon of 90 days Tidal Trust II is expected to generate 10.81 times more return on investment than PIMCO ETF. However, Tidal Trust is 10.81 times more volatile than PIMCO ETF Trust. It trades about 0.17 of its potential returns per unit of risk. PIMCO ETF Trust is currently generating about 0.01 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	Insignificant
Accuracy	66.67%
Values	Daily Returns

Tidal Trust II  vs.  PIMCO ETF Trust

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.

PIMCO ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days PIMCO ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PIMCO ETF is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tidal Trust and PIMCO ETF

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

The idea behind Tidal Trust II and PIMCO 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.