Correlation Between Cambiar Small and Cambiar Opportunity

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

By analyzing existing cross correlation between Cambiar Small Cap and Cambiar Opportunity Fund, you can compare the effects of market volatilities on Cambiar Small and Cambiar Opportunity 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 Cambiar Small with a short position of Cambiar Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambiar Small and Cambiar Opportunity.

Diversification Opportunities for Cambiar Small and Cambiar Opportunity

0.96

Correlation Coefficient

Cambiar Small  Cambiar Opportunity

Almost no diversification

The 3 months correlation between Cambiar and Cambiar is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cambiar Small Cap and Cambiar Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambiar Opportunity and Cambiar Small 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 Cambiar Small Cap are associated (or correlated) with Cambiar Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambiar Opportunity has no effect on the direction of Cambiar Small i.e., Cambiar Small and Cambiar Opportunity go up and down completely randomly.

Pair Corralation between Cambiar Small and Cambiar Opportunity

Assuming the 90 days horizon Cambiar Small Cap is expected to under-perform the Cambiar Opportunity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cambiar Small Cap is 1.21 times less risky than Cambiar Opportunity. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Cambiar Opportunity Fund is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,069  in Cambiar Opportunity Fund on December 2, 2024 and sell it today you would lose (229.00) from holding Cambiar Opportunity Fund or give up 7.46% of portfolio value over 90 days.

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

Cambiar Small Cap  vs.  Cambiar Opportunity Fund

Cambiar Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambiar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Cambiar Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambiar Opportunity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Cambiar Small and Cambiar Opportunity

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

The idea behind Cambiar Small Cap and Cambiar Opportunity Fund 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .