Correlation Between Tidal Trust and Vanguard

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

Diversification Opportunities for Tidal Trust and Vanguard

-0.42

Correlation Coefficient

Tidal Trust  Vanguard

Very good diversification

The 3 months correlation between Tidal and Vanguard is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Vanguard SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Small 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Small has no effect on the direction of Tidal Trust i.e., Tidal Trust and Vanguard go up and down completely randomly.

Pair Corralation between Tidal Trust and Vanguard

Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the Vanguard. But the etf apears to be less risky and, when comparing its historical volatility, Tidal Trust II is 1.46 times less risky than Vanguard. The etf trades about -0.09 of its potential returns per unit of risk. The Vanguard SP Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  10,278  in Vanguard SP Small Cap on September 12, 2024 and sell it today you would earn a total of  1,262  from holding Vanguard SP Small Cap or generate 12.28% return on investment over 90 days.

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

Tidal Trust II  vs.  Vanguard SP Small Cap

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 comparatively stable technical and fundamental indicators, Tidal Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard SP Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP Small Cap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tidal Trust and Vanguard

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

The idea behind Tidal Trust II and Vanguard SP Small Cap 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.