Correlation Between SPDR SP and Tidal ETF

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

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

Diversification Opportunities for SPDR SP and Tidal ETF

-0.49

Correlation Coefficient

SPDR SP  Tidal ETF

Very good diversification

The 3 months correlation between SPDR and Tidal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil 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 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 Oil 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 SPDR SP i.e., SPDR SP and Tidal ETF go up and down completely randomly.

Pair Corralation between SPDR SP and Tidal ETF

Considering the 90-day investment horizon SPDR SP is expected to generate 4.57 times less return on investment than Tidal ETF. In addition to that, SPDR SP is 1.01 times more volatile than Tidal ETF Trust. It trades about 0.01 of its total potential returns per unit of risk. Tidal ETF Trust is currently generating about 0.07 per unit of volatility. If you would invest  1,769  in Tidal ETF Trust on September 13, 2024 and sell it today you would earn a total of  1,033  from holding Tidal ETF Trust or generate 58.39% return on investment over 90 days.

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

SPDR SP Oil  vs.  Tidal ETF Trust

SPDR SP Oil

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Oil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tidal ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tidal ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SPDR SP and Tidal ETF

The main advantage of trading using opposite SPDR SP and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Oil 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 Valuation module to check real value of public entities based on technical and fundamental data.