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 LongShort, 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

-0.76

Correlation Coefficient

Tidal ETF  First Trust

Pay attention - limited upside

The 3 months correlation between Tidal and First is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tidal ETF Trust and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort 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 LongShort 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. In addition to that, Tidal ETF is 1.18 times more volatile than First Trust LongShort. It trades about -0.23 of its total potential returns per unit of risk. First Trust LongShort is currently generating about 0.22 per unit of volatility. If you would invest  6,272  in First Trust LongShort on September 17, 2024 and sell it today you would earn a total of  462.00  from holding First Trust LongShort or generate 7.37% return on investment over 90 days.

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

Tidal ETF Trust  vs.  First Trust LongShort

Tidal ETF Trust

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

First Trust LongShort

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust LongShort are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 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 LongShort 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.