Correlation Between Tidal Trust and Invesco FTSE

Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE RAFI, you can compare the effects of market volatilities on Tidal Trust and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Invesco FTSE.

Diversification Opportunities for Tidal Trust and Invesco FTSE

-0.56

Correlation Coefficient

Tidal Trust  Invesco FTSE

Excellent diversification

The 3 months correlation between Tidal and Invesco is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Tidal Trust i.e., Tidal Trust and Invesco FTSE go up and down completely randomly.

Pair Corralation between Tidal Trust and Invesco FTSE

Given the investment horizon of 90 days Tidal Trust II is expected to generate 4.69 times more return on investment than Invesco FTSE. However, Tidal Trust is 4.69 times more volatile than Invesco FTSE RAFI. It trades about 0.07 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.02 per unit of risk. If you would invest  869.00  in Tidal Trust II on October 24, 2024 and sell it today you would earn a total of  475.00  from holding Tidal Trust II or generate 54.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	38.54%
Values	Daily Returns

Tidal Trust II  vs.  Invesco FTSE RAFI

Tidal Trust II

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Tidal Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco FTSE RAFI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco FTSE RAFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tidal Trust and Invesco FTSE

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

The idea behind Tidal Trust II and Invesco FTSE RAFI 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.