Correlation Between FlexShares STOXX and Tidal ETF

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

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

Diversification Opportunities for FlexShares STOXX and Tidal ETF

0.67

Correlation Coefficient

FlexShares STOXX  Tidal ETF

Poor diversification

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

Pair Corralation between FlexShares STOXX and Tidal ETF

Considering the 90-day investment horizon FlexShares STOXX ESG is expected to generate 1.15 times more return on investment than Tidal ETF. However, FlexShares STOXX is 1.15 times more volatile than Tidal ETF Trust. It trades about -0.13 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about -0.21 per unit of risk. If you would invest  14,189  in FlexShares STOXX ESG on October 11, 2024 and sell it today you would lose (354.00) from holding FlexShares STOXX ESG or give up 2.49% of portfolio value over 90 days.

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

FlexShares STOXX ESG  vs.  Tidal ETF Trust

FlexShares STOXX ESG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX ESG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FlexShares STOXX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tidal ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tidal ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FlexShares STOXX and Tidal ETF

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

The idea behind FlexShares STOXX ESG and Tidal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.