Correlation Between IPath Series and Tidal Trust

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

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

Diversification Opportunities for IPath Series and Tidal Trust

-0.69

Correlation Coefficient

IPath Series  Tidal Trust

Excellent diversification

The 3 months correlation between IPath and Tidal is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B 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 IPath Series 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 iPath Series B 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 IPath Series i.e., IPath Series and Tidal Trust go up and down completely randomly.

Pair Corralation between IPath Series and Tidal Trust

Considering the 90-day investment horizon iPath Series B is expected to generate 3.65 times more return on investment than Tidal Trust. However, IPath Series is 3.65 times more volatile than Tidal Trust II. It trades about -0.01 of its potential returns per unit of risk. Tidal Trust II is currently generating about -0.12 per unit of risk. If you would invest  5,614  in iPath Series B on December 19, 2024 and sell it today you would lose (534.00) from holding iPath Series B or give up 9.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

iPath Series B  vs.  Tidal Trust II

iPath Series B

Risk-Adjusted Performance

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IPath Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IPath Series and Tidal Trust

The main advantage of trading using opposite IPath Series and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPath Series 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 iPath Series B 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.