Correlation Between IShares Trust and Tidal Trust

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

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

Diversification Opportunities for IShares Trust and Tidal Trust

0.95

Correlation Coefficient

IShares Trust  Tidal Trust

Almost no diversification

The 3 months correlation between IShares and Tidal is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares 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 IShares 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 iShares 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 IShares Trust i.e., IShares Trust and Tidal Trust go up and down completely randomly.

Pair Corralation between IShares Trust and Tidal Trust

Given the investment horizon of 90 days IShares Trust is expected to generate 15.95 times less return on investment than Tidal Trust. But when comparing it to its historical volatility, iShares Trust is 8.59 times less risky than Tidal Trust. It trades about 0.1 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  910.00  in Tidal Trust II on September 14, 2024 and sell it today you would earn a total of  192.00  from holding Tidal Trust II or generate 21.1% return on investment over 90 days.

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

iShares Trust   vs.  Tidal Trust II

iShares Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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. Despite quite unsteady basic indicators, Tidal Trust disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Tidal Trust

The main advantage of trading using opposite IShares Trust and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.