Correlation Between Tidal Trust and Xtrackers California

Can any of the company-specific risk be diversified away by investing in both Tidal Trust and Xtrackers California 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 Xtrackers California 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 Xtrackers California Municipal, you can compare the effects of market volatilities on Tidal Trust and Xtrackers California 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 Xtrackers California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal Trust and Xtrackers California.

Diversification Opportunities for Tidal Trust and Xtrackers California

-0.33

Correlation Coefficient

Tidal Trust  Xtrackers California

Very good diversification

The 3 months correlation between Tidal and Xtrackers is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California 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 Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of Tidal Trust i.e., Tidal Trust and Xtrackers California go up and down completely randomly.

Pair Corralation between Tidal Trust and Xtrackers California

Given the investment horizon of 90 days Tidal Trust II is expected to under-perform the Xtrackers California. In addition to that, Tidal Trust is 3.96 times more volatile than Xtrackers California Municipal. It trades about -0.03 of its total potential returns per unit of risk. Xtrackers California Municipal is currently generating about -0.03 per unit of volatility. If you would invest  2,503  in Xtrackers California Municipal on January 31, 2024 and sell it today you would lose (16.00) from holding Xtrackers California Municipal or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.24%
Values	Daily Returns

Tidal Trust II  vs.  Xtrackers California Municipal

Tidal Trust II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal Trust II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tidal Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tidal Trust and Xtrackers California

The main advantage of trading using opposite Tidal Trust and Xtrackers California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust position performs unexpectedly, Xtrackers California 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 Xtrackers California will offset losses from the drop in Xtrackers California's long position.

The idea behind Tidal Trust II and Xtrackers California Municipal 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.