Correlation Between 2x Long and Tidal Trust

Can any of the company-specific risk be diversified away by investing in both 2x Long and Tidal 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 2x Long and Tidal Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2x Long VIX and Tidal Trust II, you can compare the effects of market volatilities on 2x Long and Tidal 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 2x Long with a short position of Tidal Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2x Long and Tidal Trust.

Diversification Opportunities for 2x Long and Tidal Trust

-0.64

Correlation Coefficient

2x Long  Tidal Trust

Excellent diversification

The 3 months correlation between UVIX and Tidal is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding 2x Long VIX and Tidal Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Trust II and 2x Long 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 2x Long VIX are associated (or correlated) with Tidal Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal Trust II has no effect on the direction of 2x Long i.e., 2x Long and Tidal Trust go up and down completely randomly.

Pair Corralation between 2x Long and Tidal Trust

Given the investment horizon of 90 days 2x Long VIX is expected to generate 7.68 times more return on investment than Tidal Trust. However, 2x Long is 7.68 times more volatile than Tidal Trust II. It trades about 0.09 of its potential returns per unit of risk. Tidal Trust II is currently generating about 0.06 per unit of risk. If you would invest  3,154  in 2x Long VIX on February 3, 2025 and sell it today you would earn a total of  830.00  from holding 2x Long VIX or generate 26.32% return on investment over 90 days.

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

2x Long VIX  vs.  Tidal Trust II

2x Long VIX

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 2x Long VIX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, 2x Long showed solid returns over the last few months and may actually be approaching a breakup point.

Tidal Trust II

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Tidal Trust may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with 2x Long and Tidal Trust

The main advantage of trading using opposite 2x Long and Tidal Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2x Long position performs unexpectedly, Tidal 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 Tidal Trust will offset losses from the drop in Tidal Trust's long position.

The idea behind 2x Long VIX and Tidal Trust II 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.