Correlation Between Tidal Trust and SPDR SSGA

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

Diversification Opportunities for Tidal Trust and SPDR SSGA

-0.65

Correlation Coefficient

Tidal Trust  SPDR SSGA

Excellent diversification

The 3 months correlation between Tidal and SPDR is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and SPDR SSGA Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Sector 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Sector has no effect on the direction of Tidal Trust i.e., Tidal Trust and SPDR SSGA go up and down completely randomly.

Pair Corralation between Tidal Trust and SPDR SSGA

Given the investment horizon of 90 days Tidal Trust is expected to generate 1.98 times less return on investment than SPDR SSGA. In addition to that, Tidal Trust is 1.2 times more volatile than SPDR SSGA Sector. It trades about 0.05 of its total potential returns per unit of risk. SPDR SSGA Sector is currently generating about 0.11 per unit of volatility. If you would invest  4,338  in SPDR SSGA Sector on September 14, 2024 and sell it today you would earn a total of  1,177  from holding SPDR SSGA Sector or generate 27.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.64%
Values	Daily Returns

Tidal Trust II  vs.  SPDR SSGA Sector

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.

SPDR SSGA Sector

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA Sector are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, SPDR SSGA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tidal Trust and SPDR SSGA

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

The idea behind Tidal Trust II and SPDR SSGA Sector 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.