Correlation Between Tidal Trust and First Trust

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

Diversification Opportunities for Tidal Trust and First Trust

0.95

Correlation Coefficient

Tidal Trust  First Trust

Almost no diversification

The 3 months correlation between Tidal and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Tidal Trust i.e., Tidal Trust and First Trust go up and down completely randomly.

Pair Corralation between Tidal Trust and First Trust

Given the investment horizon of 90 days Tidal Trust II is expected to generate 4.26 times more return on investment than First Trust. However, Tidal Trust is 4.26 times more volatile than First Trust Dorsey. It trades about 0.23 of its potential returns per unit of risk. First Trust Dorsey is currently generating about 0.17 per unit of risk. If you would invest  522.00  in Tidal Trust II on May 16, 2025 and sell it today you would earn a total of  87.00  from holding Tidal Trust II or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Tidal Trust II  vs.  First Trust Dorsey

Tidal Trust II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tidal Trust showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Dorsey

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tidal Trust and First Trust

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

The idea behind Tidal Trust II and First Trust Dorsey 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.