Correlation Between Tidal Trust and Franklin Liberty

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

Diversification Opportunities for Tidal Trust and Franklin Liberty

-0.36

Correlation Coefficient

Tidal Trust  Franklin Liberty

Very good diversification

The 3 months correlation between Tidal and Franklin is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Franklin Liberty Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Short 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 Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Short has no effect on the direction of Tidal Trust i.e., Tidal Trust and Franklin Liberty go up and down completely randomly.

Pair Corralation between Tidal Trust and Franklin Liberty

Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the Franklin Liberty. In addition to that, Tidal Trust is 3.17 times more volatile than Franklin Liberty Short. It trades about -0.03 of its total potential returns per unit of risk. Franklin Liberty Short is currently generating about 0.23 per unit of volatility. If you would invest  8,955  in Franklin Liberty Short on December 29, 2024 and sell it today you would earn a total of  134.00  from holding Franklin Liberty Short or generate 1.5% return on investment over 90 days.

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

Tidal Trust II  vs.  Franklin Liberty Short

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.

Franklin Liberty Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Short are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Franklin Liberty is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tidal Trust and Franklin Liberty

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

The idea behind Tidal Trust II and Franklin Liberty Short 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.