Correlation Between Tidal Trust and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Tidal Trust and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Northern Lights.
Diversification Opportunities for Tidal Trust and Northern Lights
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tidal and Northern is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Tidal Trust i.e., Tidal Trust and Northern Lights go up and down completely randomly.
Pair Corralation between Tidal Trust and Northern Lights
Given the investment horizon of 90 days Tidal Trust II is expected to generate 2.11 times more return on investment than Northern Lights. However, Tidal Trust is 2.11 times more volatile than Northern Lights. It trades about 0.08 of its potential returns per unit of risk. Northern Lights is currently generating about -0.08 per unit of risk. If you would invest 1,277 in Tidal Trust II on September 12, 2024 and sell it today you would earn a total of 29.00 from holding Tidal Trust II or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tidal Trust II vs. Northern Lights
Performance |
| Timeline |
| Tidal Trust II |
| Northern Lights |
Tidal Trust and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tidal Trust and Northern Lights
The main advantage of trading using opposite Tidal Trust and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Tidal Trust vs. Freedom Day Dividend | Tidal Trust vs. Franklin Templeton ETF | Tidal Trust vs. iShares MSCI China | Tidal Trust vs. Tidal Trust II |
| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights vs. Tidal Trust II |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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