Correlation Between Tidal Trust and USCF Midstream

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

Diversification Opportunities for Tidal Trust and USCF Midstream

0.56

Correlation Coefficient

Tidal Trust  USCF Midstream

Very weak diversification

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

Pair Corralation between Tidal Trust and USCF Midstream

Given the investment horizon of 90 days Tidal Trust is expected to generate 12.47 times less return on investment than USCF Midstream. But when comparing it to its historical volatility, Tidal Trust II is 3.56 times less risky than USCF Midstream. It trades about 0.05 of its potential returns per unit of risk. USCF Midstream Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,469  in USCF Midstream Energy on September 14, 2024 and sell it today you would earn a total of  577.00  from holding USCF Midstream Energy or generate 12.91% return on investment over 90 days.

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

Tidal Trust II  vs.  USCF Midstream Energy

Tidal Trust II

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tidal Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

USCF Midstream Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USCF Midstream Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting primary indicators, USCF Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tidal Trust and USCF Midstream

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

The idea behind Tidal Trust II and USCF Midstream Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.