Correlation Between Tidal Trust and KraneShares CSI

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

Diversification Opportunities for Tidal Trust and KraneShares CSI

0.9

Correlation Coefficient

Tidal Trust  KraneShares CSI

Almost no diversification

The 3 months correlation between Tidal and KraneShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI China 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 KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of Tidal Trust i.e., Tidal Trust and KraneShares CSI go up and down completely randomly.

Pair Corralation between Tidal Trust and KraneShares CSI

Given the investment horizon of 90 days Tidal Trust is expected to generate 1.05 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, Tidal Trust II is 1.12 times less risky than KraneShares CSI. It trades about 0.13 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,542  in KraneShares CSI China on September 13, 2024 and sell it today you would earn a total of  675.00  from holding KraneShares CSI China or generate 26.55% return on investment over 90 days.

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

Tidal Trust II  vs.  KraneShares CSI China

Tidal Trust II

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Tidal Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

KraneShares CSI China

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tidal Trust and KraneShares CSI

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

The idea behind Tidal Trust II and KraneShares CSI China 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.