Correlation Between Tidal ETF and KFA Mount

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

Diversification Opportunities for Tidal ETF and KFA Mount

0.54

Correlation Coefficient

Tidal ETF  KFA Mount

Very weak diversification

The 3 months correlation between Tidal and KFA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tidal ETF Trust and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas 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 KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of Tidal ETF i.e., Tidal ETF and KFA Mount go up and down completely randomly.

Pair Corralation between Tidal ETF and KFA Mount

Given the investment horizon of 90 days Tidal ETF Trust is expected to under-perform the KFA Mount. In addition to that, Tidal ETF is 1.24 times more volatile than KFA Mount Lucas. It trades about -0.46 of its total potential returns per unit of risk. KFA Mount Lucas is currently generating about 0.04 per unit of volatility. If you would invest  2,797  in KFA Mount Lucas on September 18, 2024 and sell it today you would earn a total of  12.00  from holding KFA Mount Lucas or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Tidal ETF Trust  vs.  KFA Mount Lucas

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.

KFA Mount Lucas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KFA Mount Lucas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, KFA Mount is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tidal ETF and KFA Mount

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

The idea behind Tidal ETF Trust and KFA Mount Lucas 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.