Correlation Between Tidal Trust and Simplify Volatility

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

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

Diversification Opportunities for Tidal Trust and Simplify Volatility

0.58

Correlation Coefficient

Tidal Trust  Simplify Volatility

Very weak diversification

The 3 months correlation between Tidal and Simplify is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility and Tidal Trust 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 Trust II are associated (or correlated) with Simplify Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Volatility has no effect on the direction of Tidal Trust i.e., Tidal Trust and Simplify Volatility go up and down completely randomly.

Pair Corralation between Tidal Trust and Simplify Volatility

Given the investment horizon of 90 days Tidal Trust II is expected to generate 4.16 times more return on investment than Simplify Volatility. However, Tidal Trust is 4.16 times more volatile than Simplify Volatility Premium. It trades about 0.04 of its potential returns per unit of risk. Simplify Volatility Premium is currently generating about 0.1 per unit of risk. If you would invest  1,064  in Tidal Trust II on September 2, 2024 and sell it today you would earn a total of  380.00  from holding Tidal Trust II or generate 35.71% return on investment over 90 days.

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

Tidal Trust II  vs.  Simplify Volatility Premium

Tidal Trust II

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Tidal Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Simplify Volatility

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Volatility Premium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Tidal Trust and Simplify Volatility

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

The idea behind Tidal Trust II and Simplify Volatility Premium 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.