Correlation Between Fidelity Covington and Tidal Trust

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

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

Diversification Opportunities for Fidelity Covington and Tidal Trust

0.33

Correlation Coefficient

Fidelity Covington  Tidal Trust

Weak diversification

The 3 months correlation between Fidelity and Tidal is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust 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 Fidelity Covington 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 Fidelity Covington Trust 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 Fidelity Covington i.e., Fidelity Covington and Tidal Trust go up and down completely randomly.

Pair Corralation between Fidelity Covington and Tidal Trust

Given the investment horizon of 90 days Fidelity Covington is expected to generate 7.97 times less return on investment than Tidal Trust. But when comparing it to its historical volatility, Fidelity Covington Trust is 1.41 times less risky than Tidal Trust. It trades about 0.03 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,481  in Tidal Trust II on September 27, 2024 and sell it today you would earn a total of  217.00  from holding Tidal Trust II or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	37.5%
Values	Daily Returns

Fidelity Covington Trust  vs.  Tidal Trust II

Fidelity Covington Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tidal Trust II

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 15 (%) 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.

Pair Trading with Fidelity Covington and Tidal Trust

The main advantage of trading using opposite Fidelity Covington and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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 Fidelity Covington Trust 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.