Correlation Between Tidal ETF and Roundhill Cannabis

Can any of the company-specific risk be diversified away by investing in both Tidal ETF and Roundhill Cannabis 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 ETF and Roundhill Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tidal ETF Trust and Roundhill Cannabis ETF, you can compare the effects of market volatilities on Tidal ETF and Roundhill Cannabis 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 ETF with a short position of Roundhill Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tidal ETF and Roundhill Cannabis.

Diversification Opportunities for Tidal ETF and Roundhill Cannabis

0.06

Correlation Coefficient

Tidal ETF  Roundhill Cannabis

Significant diversification

The 3 months correlation between Tidal and Roundhill is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tidal ETF Trust and Roundhill Cannabis ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Cannabis ETF and Tidal ETF 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 ETF Trust are associated (or correlated) with Roundhill Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Cannabis ETF has no effect on the direction of Tidal ETF i.e., Tidal ETF and Roundhill Cannabis go up and down completely randomly.

Pair Corralation between Tidal ETF and Roundhill Cannabis

Given the investment horizon of 90 days Tidal ETF is expected to generate 4.78 times less return on investment than Roundhill Cannabis. But when comparing it to its historical volatility, Tidal ETF Trust is 6.31 times less risky than Roundhill Cannabis. It trades about 0.11 of its potential returns per unit of risk. Roundhill Cannabis ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,049  in Roundhill Cannabis ETF on January 20, 2024 and sell it today you would earn a total of  1,918  from holding Roundhill Cannabis ETF or generate 93.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Tidal ETF Trust  vs.  Roundhill Cannabis ETF

Tidal ETF Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tidal ETF is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Roundhill Cannabis ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Cannabis ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Roundhill Cannabis may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Tidal ETF and Roundhill Cannabis

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

The idea behind Tidal ETF Trust and Roundhill Cannabis ETF 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.