Correlation Between Pacer Funds and Tidal Trust

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

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

Diversification Opportunities for Pacer Funds and Tidal Trust

0.48

Correlation Coefficient

Pacer Funds  Tidal Trust

Very weak diversification

The 3 months correlation between Pacer and Tidal is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Funds Trust and Tidal Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Trust II and Pacer Funds 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 Pacer Funds Trust are associated (or correlated) with Tidal Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal Trust II has no effect on the direction of Pacer Funds i.e., Pacer Funds and Tidal Trust go up and down completely randomly.

Pair Corralation between Pacer Funds and Tidal Trust

Given the investment horizon of 90 days Pacer Funds is expected to generate 8.07 times less return on investment than Tidal Trust. But when comparing it to its historical volatility, Pacer Funds Trust is 2.77 times less risky than Tidal Trust. It trades about 0.07 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,008  in Tidal Trust II on December 2, 2024 and sell it today you would earn a total of  187.00  from holding Tidal Trust II or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Pacer Funds Trust  vs.  Tidal Trust II

Pacer Funds Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Funds Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Pacer Funds is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Tidal Trust II

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Tidal Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pacer Funds and Tidal Trust

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

The idea behind Pacer Funds Trust and Tidal Trust II 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.