Correlation Between Tidal Trust and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Tidal Trust and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Dow Jones.
Diversification Opportunities for Tidal Trust and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tidal and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Tidal Trust i.e., Tidal Trust and Dow Jones go up and down completely randomly.
Pair Corralation between Tidal Trust and Dow Jones
Given the investment horizon of 90 days Tidal Trust is expected to generate 3.03 times less return on investment than Dow Jones. In addition to that, Tidal Trust is 6.23 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of volatility. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Tidal Trust II vs. Dow Jones Industrial
Performance |
| Timeline |
Tidal Trust and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Tidal Trust II
Pair trading matchups for Tidal Trust
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Tidal Trust and Dow Jones
The main advantage of trading using opposite Tidal Trust and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Tidal Trust vs. First Trust Exchange Traded | Tidal Trust vs. Ultimus Managers Trust | Tidal Trust vs. Horizon Kinetics Medical | Tidal Trust vs. Harbor Health Care |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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