Correlation Between Vanguard Large and Tidal ETF

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

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

Diversification Opportunities for Vanguard Large and Tidal ETF

0.79

Correlation Coefficient

Vanguard Large  Tidal ETF

Poor diversification

The 3 months correlation between Vanguard and Tidal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large Cap Index 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 Vanguard Large 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 Vanguard Large Cap Index 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 Vanguard Large i.e., Vanguard Large and Tidal ETF go up and down completely randomly.

Pair Corralation between Vanguard Large and Tidal ETF

Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to under-perform the Tidal ETF. In addition to that, Vanguard Large is 1.07 times more volatile than Tidal ETF Trust. It trades about -0.08 of its total potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.01 per unit of volatility. If you would invest  2,048  in Tidal ETF Trust on December 28, 2024 and sell it today you would earn a total of  4.50  from holding Tidal ETF Trust or generate 0.22% return on investment over 90 days.

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

Vanguard Large Cap Index  vs.  Tidal ETF Trust

Vanguard Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Large Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tidal ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tidal ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Tidal ETF is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Large and Tidal ETF

The main advantage of trading using opposite Vanguard Large and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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 Vanguard Large Cap Index 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.