Correlation Between Volatility Shares and Tidal Trust

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

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

Diversification Opportunities for Volatility Shares and Tidal Trust

-0.67

Correlation Coefficient

Volatility Shares  Tidal Trust

Excellent diversification

The 3 months correlation between Volatility and Tidal is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Tidal Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Trust II and Volatility Shares 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 Volatility Shares Trust are associated (or correlated) with Tidal Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal Trust II has no effect on the direction of Volatility Shares i.e., Volatility Shares and Tidal Trust go up and down completely randomly.

Pair Corralation between Volatility Shares and Tidal Trust

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the Tidal Trust. In addition to that, Volatility Shares is 4.91 times more volatile than Tidal Trust II. It trades about -0.07 of its total potential returns per unit of risk. Tidal Trust II is currently generating about 0.32 per unit of volatility. If you would invest  1,257  in Tidal Trust II on December 29, 2024 and sell it today you would earn a total of  336.00  from holding Tidal Trust II or generate 26.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Volatility Shares Trust  vs.  Tidal Trust II

Volatility Shares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volatility Shares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Tidal Trust II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tidal Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volatility Shares and Tidal Trust

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

The idea behind Volatility Shares Trust and Tidal Trust II 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.