Correlation Between IShares SP and Tidal ETF

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

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

Diversification Opportunities for IShares SP and Tidal ETF

0.94

Correlation Coefficient

IShares SP  Tidal ETF

Almost no diversification

The 3 months correlation between IShares and Tidal is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap 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 IShares 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 iShares SP Mid Cap 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 IShares SP i.e., IShares SP and Tidal ETF go up and down completely randomly.

Pair Corralation between IShares SP and Tidal ETF

Considering the 90-day investment horizon iShares SP Mid Cap is expected to under-perform the Tidal ETF. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP Mid Cap is 1.22 times less risky than Tidal ETF. The etf trades about -0.09 of its potential returns per unit of risk. The Tidal ETF Trust is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,044  in Tidal ETF Trust on December 28, 2024 and sell it today you would lose (95.00) from holding Tidal ETF Trust or give up 4.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

iShares SP Mid Cap  vs.  Tidal ETF Trust

iShares SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's forward-looking indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Tidal ETF Trust

Risk-Adjusted Performance

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 very healthy basic 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 IShares SP and Tidal ETF

The main advantage of trading using opposite IShares SP and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 iShares SP Mid Cap 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.