Correlation Between IShares MSCI and Tidal Trust

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

Diversification Opportunities for IShares MSCI and Tidal Trust

0.78

Correlation Coefficient

IShares MSCI  Tidal Trust

Poor diversification

The 3 months correlation between IShares and Tidal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China 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 MSCI 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 MSCI China 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 MSCI i.e., IShares MSCI and Tidal Trust go up and down completely randomly.

Pair Corralation between IShares MSCI and Tidal Trust

Given the investment horizon of 90 days iShares MSCI China is expected to generate 1.5 times more return on investment than Tidal Trust. However, IShares MSCI is 1.5 times more volatile than Tidal Trust II. It trades about 0.1 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.03 per unit of risk. If you would invest  4,090  in iShares MSCI China on September 13, 2024 and sell it today you would earn a total of  794.00  from holding iShares MSCI China or generate 19.41% return on investment over 90 days.

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

iShares MSCI China  vs.  Tidal Trust II

iShares MSCI China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tidal Trust II

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Tidal Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Tidal Trust

The main advantage of trading using opposite IShares MSCI and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI China 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.