Correlation Between Vanguard Extended and Tidal Trust

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

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

Diversification Opportunities for Vanguard Extended and Tidal Trust

-0.27

Correlation Coefficient

Vanguard Extended  Tidal Trust

Very good diversification

The 3 months correlation between Vanguard and Tidal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Duration 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 Vanguard Extended 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 Vanguard Extended Duration 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 Vanguard Extended i.e., Vanguard Extended and Tidal Trust go up and down completely randomly.

Pair Corralation between Vanguard Extended and Tidal Trust

Considering the 90-day investment horizon Vanguard Extended Duration is expected to generate 3.25 times more return on investment than Tidal Trust. However, Vanguard Extended is 3.25 times more volatile than Tidal Trust II. It trades about 0.02 of its potential returns per unit of risk. Tidal Trust II is currently generating about -0.03 per unit of risk. If you would invest  6,800  in Vanguard Extended Duration on December 29, 2024 and sell it today you would earn a total of  74.00  from holding Vanguard Extended Duration or generate 1.09% return on investment over 90 days.

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

Vanguard Extended Duration  vs.  Tidal Trust II

Vanguard Extended

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Duration are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Vanguard Extended is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tidal Trust II

Risk-Adjusted Performance

Very Weak

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 fairly strong basic indicators, Tidal Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Extended and Tidal Trust

The main advantage of trading using opposite Vanguard Extended and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended 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 Vanguard Extended Duration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.