Correlation Between Tidal Trust and Optimize Strategy

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

Diversification Opportunities for Tidal Trust and Optimize Strategy

-0.77

Correlation Coefficient

Tidal Trust  Optimize Strategy

Pay attention - limited upside

The 3 months correlation between Tidal and Optimize is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Optimize Strategy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimize Strategy Index 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 Optimize Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimize Strategy Index has no effect on the direction of Tidal Trust i.e., Tidal Trust and Optimize Strategy go up and down completely randomly.

Pair Corralation between Tidal Trust and Optimize Strategy

Given the investment horizon of 90 days Tidal Trust II is expected to generate 2.89 times more return on investment than Optimize Strategy. However, Tidal Trust is 2.89 times more volatile than Optimize Strategy Index. It trades about 0.08 of its potential returns per unit of risk. Optimize Strategy Index is currently generating about -0.09 per unit of risk. If you would invest  1,085  in Tidal Trust II on December 29, 2024 and sell it today you would earn a total of  160.00  from holding Tidal Trust II or generate 14.75% return on investment over 90 days.

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

Tidal Trust II  vs.  Optimize Strategy Index

Tidal Trust II

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tidal Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Optimize Strategy Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimize Strategy Index 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Tidal Trust and Optimize Strategy

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

The idea behind Tidal Trust II and Optimize Strategy Index 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.