Correlation Between Tidal Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both Tidal Trust and First 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 Tidal Trust and First Trust 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 First Trust Dorsey, you can compare the effects of market volatilities on Tidal Trust and First 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 Tidal Trust with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and First Trust.
Diversification Opportunities for Tidal Trust and First Trust
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Tidal and First is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Tidal Trust i.e., Tidal Trust and First Trust go up and down completely randomly.
Pair Corralation between Tidal Trust and First Trust
Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the First Trust. In addition to that, Tidal Trust is 1.47 times more volatile than First Trust Dorsey. It trades about -0.1 of its total potential returns per unit of risk. First Trust Dorsey is currently generating about 0.36 per unit of volatility. If you would invest 2,505 in First Trust Dorsey on September 1, 2024 and sell it today you would earn a total of 219.00 from holding First Trust Dorsey or generate 8.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tidal Trust II vs. First Trust Dorsey
Performance |
| Timeline |
| Tidal Trust II |
| First Trust Dorsey |
Tidal Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tidal Trust and First Trust
The main advantage of trading using opposite Tidal Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.| Tidal Trust vs. Tidal Trust II | Tidal Trust vs. Direxion Daily META | Tidal Trust vs. Direxion Daily META | Tidal Trust vs. Tidal Trust II |
| First Trust vs. Cambria Global Asset | First Trust vs. Cambria Global Value | First Trust vs. Cambria Foreign Shareholder | First Trust vs. Cambria Value and |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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