Correlation Between MicroSectors FANG and Tidal ETF

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Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Tidal ETF 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 MicroSectors FANG and Tidal ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Tidal ETF Trust, you can compare the effects of market volatilities on MicroSectors FANG and Tidal ETF 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 MicroSectors FANG with a short position of Tidal ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Tidal ETF.

Diversification Opportunities for MicroSectors FANG and Tidal ETF

MicroSectorsTidalDiversified AwayMicroSectorsTidalDiversified Away100%
-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between MicroSectors and Tidal is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal ETF Trust and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Tidal ETF go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Tidal ETF

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Tidal ETF. In addition to that, MicroSectors FANG is 3.69 times more volatile than Tidal ETF Trust. It trades about -0.11 of its total potential returns per unit of risk. Tidal ETF Trust is currently generating about -0.09 per unit of volatility. If you would invest  2,106  in Tidal ETF Trust on November 27, 2024 and sell it today you would lose (31.00) from holding Tidal ETF Trust or give up 1.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

MicroSectors FANG Index  vs.  Tidal ETF Trust

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030
JavaScript chart by amCharts 3.21.15FNGO REAI
       Timeline  
MicroSectors FANG Index 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, MicroSectors FANG may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb80859095100105
Tidal ETF Trust 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Tidal ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2020.52121.52222.5

MicroSectors FANG and Tidal ETF Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.53-7.14-4.75-2.350.02.44.897.379.8612.34 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15FNGO REAI
       Returns  

Pair Trading with MicroSectors FANG and Tidal ETF

The main advantage of trading using opposite MicroSectors FANG and Tidal ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Tidal ETF 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 ETF will offset losses from the drop in Tidal ETF's long position.
The idea behind MicroSectors FANG Index and Tidal ETF Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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