Correlation Between Tidal ETF and First Trust

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

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

Diversification Opportunities for Tidal ETF and First Trust

0.85

Correlation Coefficient

Tidal ETF  First Trust

Very poor diversification

The 3 months correlation between Tidal and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tidal ETF Trust and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and Tidal ETF 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 ETF Trust are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Managed has no effect on the direction of Tidal ETF i.e., Tidal ETF and First Trust go up and down completely randomly.

Pair Corralation between Tidal ETF and First Trust

Given the investment horizon of 90 days Tidal ETF Trust is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Tidal ETF Trust is 1.77 times less risky than First Trust. The etf trades about -0.11 of its potential returns per unit of risk. The First Trust Managed is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,796  in First Trust Managed on October 7, 2024 and sell it today you would earn a total of  43.00  from holding First Trust Managed or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Tidal ETF Trust  vs.  First Trust Managed

Tidal ETF Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking indicators, Tidal ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Trust Managed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tidal ETF and First Trust

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

The idea behind Tidal ETF Trust and First Trust Managed 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.