Correlation Between First Trust and Tidal ETF

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

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

Diversification Opportunities for First Trust and Tidal ETF

0.85

Correlation Coefficient

First Trust  Tidal ETF

Very poor diversification

The 3 months correlation between First and Tidal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed 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 First 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 First Trust Managed 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 First Trust i.e., First Trust and Tidal ETF go up and down completely randomly.

Pair Corralation between First Trust and Tidal ETF

Considering the 90-day investment horizon First Trust Managed is expected to generate 1.77 times more return on investment than Tidal ETF. However, First Trust is 1.77 times more volatile than Tidal ETF Trust. It trades about 0.08 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about -0.11 per unit of risk. If you would invest  4,796  in First Trust Managed on October 7, 2024 and sell it today you would earn a total of  43.00  from holding First Trust Managed or generate 0.9% return on investment over 90 days.

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

First Trust Managed  vs.  Tidal ETF Trust

First Trust Managed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tidal ETF Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking indicators, Tidal ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Tidal ETF

The main advantage of trading using opposite First Trust and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Managed 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.