Correlation Between IShares MSCI and Tidal ETF

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

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

Diversification Opportunities for IShares MSCI and Tidal ETF

0.38

Correlation Coefficient

IShares MSCI  Tidal ETF

Weak diversification

The 3 months correlation between IShares and Tidal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal ETF Trust and IShares MSCI 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 iShares MSCI China are associated (or correlated) with Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and Tidal ETF go up and down completely randomly.

Pair Corralation between IShares MSCI and Tidal ETF

Given the investment horizon of 90 days iShares MSCI China is expected to generate 2.25 times more return on investment than Tidal ETF. However, IShares MSCI is 2.25 times more volatile than Tidal ETF Trust. It trades about 0.17 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.04 per unit of risk. If you would invest  4,695  in iShares MSCI China on December 28, 2024 and sell it today you would earn a total of  886.00  from holding iShares MSCI China or generate 18.87% return on investment over 90 days.

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

iShares MSCI China  vs.  Tidal ETF Trust

iShares MSCI China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tidal ETF Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tidal ETF is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Tidal ETF

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

The idea behind iShares MSCI China and Tidal ETF Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.