Correlation Between Tidal Trust and IShares MSCI

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

Diversification Opportunities for Tidal Trust and IShares MSCI

-0.38

Correlation Coefficient

Tidal Trust  IShares MSCI

Very good diversification

The 3 months correlation between Tidal and IShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Tidal Trust i.e., Tidal Trust and IShares MSCI go up and down completely randomly.

Pair Corralation between Tidal Trust and IShares MSCI

Given the investment horizon of 90 days Tidal Trust is expected to generate 4.16 times less return on investment than IShares MSCI. In addition to that, Tidal Trust is 1.21 times more volatile than iShares MSCI USA. It trades about 0.02 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about 0.11 per unit of volatility. If you would invest  8,055  in iShares MSCI USA on September 25, 2024 and sell it today you would earn a total of  4,285  from holding iShares MSCI USA or generate 53.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.57%
Values	Daily Returns

Tidal Trust II  vs.  iShares MSCI USA

Tidal Trust II

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

iShares MSCI USA

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tidal Trust and IShares MSCI

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

The idea behind Tidal Trust II and iShares MSCI USA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.