Correlation Between SPDR SP and Tidal Trust

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

By analyzing existing cross correlation between SPDR SP 500 and Tidal Trust II, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Tidal Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Tidal Trust.

Diversification Opportunities for SPDR SP and Tidal Trust

0.89

Correlation Coefficient

SPDR SP  Tidal Trust

Very poor diversification

The 3 months correlation between SPDR and Tidal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and Tidal Trust go up and down completely randomly.

Pair Corralation between SPDR SP and Tidal Trust

Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.35 times more return on investment than Tidal Trust. However, SPDR SP 500 is 2.88 times less risky than Tidal Trust. It trades about -0.11 of its potential returns per unit of risk. Tidal Trust II is currently generating about -0.1 per unit of risk. If you would invest  60,265  in SPDR SP 500 on October 10, 2024 and sell it today you would lose (1,402) from holding SPDR SP 500 or give up 2.33% of portfolio value over 90 days.

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

SPDR SP 500  vs.  Tidal Trust II

SPDR SP 500

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tidal Trust II

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Tidal Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Tidal Trust

The main advantage of trading using opposite SPDR SP and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP 500 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.