Correlation Between Tidal ETF and Pimco California

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

Diversification Opportunities for Tidal ETF and Pimco California

0.22

Correlation Coefficient

Tidal ETF  Pimco California

Modest diversification

The 3 months correlation between Tidal and Pimco is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tidal ETF Trust and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun 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 Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of Tidal ETF i.e., Tidal ETF and Pimco California go up and down completely randomly.

Pair Corralation between Tidal ETF and Pimco California

Given the investment horizon of 90 days Tidal ETF Trust is expected to generate 2.88 times more return on investment than Pimco California. However, Tidal ETF is 2.88 times more volatile than Pimco California Municipal. It trades about 0.01 of its potential returns per unit of risk. Pimco California Municipal is currently generating about -0.22 per unit of risk. If you would invest  2,652  in Tidal ETF Trust on January 26, 2024 and sell it today you would earn a total of  1.10  from holding Tidal ETF Trust or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Tidal ETF Trust  vs.  Pimco California Municipal

Tidal ETF Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal ETF Trust are ranked lower than 8 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pimco California Mun

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco California Municipal are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tidal ETF and Pimco California

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

The idea behind Tidal ETF Trust and Pimco 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.