Correlation Between WisdomTree Dynamic and Cambria Foreign

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

By analyzing existing cross correlation between WisdomTree Dynamic Currency and Cambria Foreign Shareholder, you can compare the effects of market volatilities on WisdomTree Dynamic and Cambria Foreign 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 WisdomTree Dynamic with a short position of Cambria Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Dynamic and Cambria Foreign.

Diversification Opportunities for WisdomTree Dynamic and Cambria Foreign

0.9

Correlation Coefficient

WisdomTree Dynamic  Cambria Foreign

Almost no diversification

The 3 months correlation between WisdomTree and Cambria is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Dynamic Currency and Cambria Foreign Shareholder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Foreign Shar and WisdomTree Dynamic 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 WisdomTree Dynamic Currency are associated (or correlated) with Cambria Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Foreign Shar has no effect on the direction of WisdomTree Dynamic i.e., WisdomTree Dynamic and Cambria Foreign go up and down completely randomly.

Pair Corralation between WisdomTree Dynamic and Cambria Foreign

Given the investment horizon of 90 days WisdomTree Dynamic Currency is expected to generate 0.8 times more return on investment than Cambria Foreign. However, WisdomTree Dynamic Currency is 1.25 times less risky than Cambria Foreign. It trades about -0.01 of its potential returns per unit of risk. Cambria Foreign Shareholder is currently generating about -0.07 per unit of risk. If you would invest  3,563  in WisdomTree Dynamic Currency on September 14, 2024 and sell it today you would lose (28.00) from holding WisdomTree Dynamic Currency or give up 0.79% of portfolio value over 90 days.

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

WisdomTree Dynamic Currency  vs.  Cambria Foreign Shareholder

WisdomTree Dynamic

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WisdomTree Dynamic Currency has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, WisdomTree Dynamic is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Cambria Foreign Shar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Foreign Shareholder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cambria Foreign is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree Dynamic and Cambria Foreign

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

The idea behind WisdomTree Dynamic Currency and Cambria Foreign Shareholder 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.