Correlation Between Cambria Foreign and ALPS Emerging

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

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

Diversification Opportunities for Cambria Foreign and ALPS Emerging

0.9

Correlation Coefficient

Cambria Foreign  ALPS Emerging

Almost no diversification

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

Pair Corralation between Cambria Foreign and ALPS Emerging

Given the investment horizon of 90 days Cambria Foreign Shareholder is expected to under-perform the ALPS Emerging. But the etf apears to be less risky and, when comparing its historical volatility, Cambria Foreign Shareholder is 1.14 times less risky than ALPS Emerging. The etf trades about -0.27 of its potential returns per unit of risk. The ALPS Emerging Sector is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,118  in ALPS Emerging Sector on September 21, 2024 and sell it today you would lose (48.00) from holding ALPS Emerging Sector or give up 2.27% of portfolio value over 90 days.

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

Cambria Foreign Shareholder  vs.  ALPS Emerging Sector

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 latest unfluctuating performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

ALPS Emerging Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Emerging Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALPS Emerging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cambria Foreign and ALPS Emerging

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

The idea behind Cambria Foreign Shareholder and ALPS Emerging Sector 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.