Correlation Between Tidal Trust and ProShares Ultra

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

Diversification Opportunities for Tidal Trust and ProShares Ultra

-0.38

Correlation Coefficient

Tidal Trust  ProShares Ultra

Very good diversification

The 3 months correlation between Tidal and ProShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and ProShares Ultra Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Fina 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 ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Fina has no effect on the direction of Tidal Trust i.e., Tidal Trust and ProShares Ultra go up and down completely randomly.

Pair Corralation between Tidal Trust and ProShares Ultra

Given the investment horizon of 90 days Tidal Trust II is expected to generate 1.12 times more return on investment than ProShares Ultra. However, Tidal Trust is 1.12 times more volatile than ProShares Ultra Financials. It trades about -0.01 of its potential returns per unit of risk. ProShares Ultra Financials is currently generating about -0.25 per unit of risk. If you would invest  2,070  in Tidal Trust II on September 23, 2024 and sell it today you would lose (14.00) from holding Tidal Trust II or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tidal Trust II  vs.  ProShares Ultra Financials

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.

ProShares Ultra Fina

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Financials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tidal Trust and ProShares Ultra

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

The idea behind Tidal Trust II and ProShares Ultra Financials 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.