Correlation Between First Trust and Cambria Global

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

By analyzing existing cross correlation between First Trust Emerging and Cambria Global Asset, you can compare the effects of market volatilities on First Trust and Cambria Global 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 First Trust with a short position of Cambria Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Cambria Global.

Diversification Opportunities for First Trust and Cambria Global

0.3

Correlation Coefficient

First Trust  Cambria Global

Weak diversification

The 3 months correlation between First and Cambria is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and Cambria Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Asset and First Trust 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 First Trust Emerging are associated (or correlated) with Cambria Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Global Asset has no effect on the direction of First Trust i.e., First Trust and Cambria Global go up and down completely randomly.

Pair Corralation between First Trust and Cambria Global

Given the investment horizon of 90 days First Trust Emerging is expected to under-perform the Cambria Global. In addition to that, First Trust is 1.05 times more volatile than Cambria Global Asset. It trades about -0.15 of its total potential returns per unit of risk. Cambria Global Asset is currently generating about 0.02 per unit of volatility. If you would invest  2,897  in Cambria Global Asset on September 17, 2024 and sell it today you would earn a total of  13.00  from holding Cambria Global Asset or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

First Trust Emerging  vs.  Cambria Global Asset

First Trust Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Cambria Global Asset

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Global Asset are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cambria Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Cambria Global

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

The idea behind First Trust Emerging and Cambria Global Asset 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.