Correlation Between SPDR SP and Tidal Trust

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

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

Diversification Opportunities for SPDR SP and Tidal Trust

0.91

Correlation Coefficient

SPDR SP  Tidal Trust

Almost no diversification

The 3 months correlation between SPDR and Tidal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP China 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 SPDR SP 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 SPDR SP China 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 SPDR SP i.e., SPDR SP and Tidal Trust go up and down completely randomly.

Pair Corralation between SPDR SP and Tidal Trust

Considering the 90-day investment horizon SPDR SP is expected to generate 1.48 times less return on investment than Tidal Trust. But when comparing it to its historical volatility, SPDR SP China is 1.17 times less risky than Tidal Trust. It trades about 0.12 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,204  in Tidal Trust II on November 28, 2024 and sell it today you would earn a total of  401.00  from holding Tidal Trust II or generate 18.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.55%
Values	Daily Returns

SPDR SP China  vs.  Tidal Trust II

SPDR SP China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP China are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish basic indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tidal Trust II

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Tidal Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Tidal Trust

The main advantage of trading using opposite SPDR SP and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP China 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.