Correlation Between First Trust and Tidal Trust

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

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

Diversification Opportunities for First Trust and Tidal Trust

0.98

Correlation Coefficient

First Trust  Tidal Trust

Almost no diversification

The 3 months correlation between First and Tidal is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Municipal and Tidal Trust III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Trust III 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 Municipal 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 III has no effect on the direction of First Trust i.e., First Trust and Tidal Trust go up and down completely randomly.

Pair Corralation between First Trust and Tidal Trust

Given the investment horizon of 90 days First Trust Municipal is expected to under-perform the Tidal Trust. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Municipal is 1.12 times less risky than Tidal Trust. The etf trades about -0.01 of its potential returns per unit of risk. The Tidal Trust III is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,517  in Tidal Trust III on December 28, 2024 and sell it today you would lose (4.00) from holding Tidal Trust III or give up 0.16% of portfolio value over 90 days.

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

First Trust Municipal  vs.  Tidal Trust III

First Trust Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, First Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Tidal Trust III

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tidal Trust III has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tidal Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Trust and Tidal Trust

The main advantage of trading using opposite First Trust and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Municipal and Tidal Trust III 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..