Correlation Between Tidal Trust and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Natural Gas 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 Natural Gas 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 Natural Gas, you can compare the effects of market volatilities on Tidal Trust and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Natural Gas.
Diversification Opportunities for Tidal Trust and Natural Gas
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tidal and Natural is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas has no effect on the direction of Tidal Trust i.e., Tidal Trust and Natural Gas go up and down completely randomly.
Pair Corralation between Tidal Trust and Natural Gas
Given the investment horizon of 90 days Tidal Trust is expected to generate 3.84 times less return on investment than Natural Gas. But when comparing it to its historical volatility, Tidal Trust II is 4.21 times less risky than Natural Gas. It trades about 0.34 of its potential returns per unit of risk. Natural Gas is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 231.00 in Natural Gas on August 28, 2024 and sell it today you would earn a total of 109.00 from holding Natural Gas or generate 47.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tidal Trust II vs. Natural Gas
Performance |
| Timeline |
| Tidal Trust II |
| Natural Gas |
Tidal Trust and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tidal Trust and Natural Gas
The main advantage of trading using opposite Tidal Trust and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Tidal Trust vs. Tidal Trust II | Tidal Trust vs. First Trust Dorsey | Tidal Trust vs. Direxion Daily META | Tidal Trust vs. Direxion Daily META |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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