Correlation Between Simplify Volatility and Tidal Trust

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

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

Diversification Opportunities for Simplify Volatility and Tidal Trust

-0.2

Correlation Coefficient

Simplify Volatility  Tidal Trust

Good diversification

The 3 months correlation between Simplify and Tidal is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Volatility Premium 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 Simplify Volatility 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 Simplify Volatility Premium 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 Simplify Volatility i.e., Simplify Volatility and Tidal Trust go up and down completely randomly.

Pair Corralation between Simplify Volatility and Tidal Trust

Given the investment horizon of 90 days Simplify Volatility Premium is expected to generate 0.25 times more return on investment than Tidal Trust. However, Simplify Volatility Premium is 3.93 times less risky than Tidal Trust. It trades about -0.13 of its potential returns per unit of risk. Tidal Trust II is currently generating about -0.35 per unit of risk. If you would invest  2,113  in Simplify Volatility Premium on November 28, 2024 and sell it today you would lose (50.50) from holding Simplify Volatility Premium or give up 2.39% of portfolio value over 90 days.

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

Simplify Volatility Premium  vs.  Tidal Trust II

Simplify Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Volatility Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Simplify Volatility is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Tidal Trust II

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tidal Trust II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's essential indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Simplify Volatility and Tidal Trust

The main advantage of trading using opposite Simplify Volatility and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Volatility 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 Simplify Volatility Premium 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.