Correlation Between Cambria Global and IShares Morningstar

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

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

Diversification Opportunities for Cambria Global and IShares Morningstar

0.87

Correlation Coefficient

Cambria Global  IShares Morningstar

Very poor diversification

The 3 months correlation between Cambria and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Global Asset and iShares Morningstar Multi Asse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar and Cambria Global 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 Global Asset are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Cambria Global i.e., Cambria Global and IShares Morningstar go up and down completely randomly.

Pair Corralation between Cambria Global and IShares Morningstar

Considering the 90-day investment horizon Cambria Global is expected to generate 1.42 times less return on investment than IShares Morningstar. In addition to that, Cambria Global is 1.53 times more volatile than iShares Morningstar Multi Asset. It trades about 0.11 of its total potential returns per unit of risk. iShares Morningstar Multi Asset is currently generating about 0.23 per unit of volatility. If you would invest  1,944  in iShares Morningstar Multi Asset on December 20, 2024 and sell it today you would earn a total of  87.00  from holding iShares Morningstar Multi Asset or generate 4.48% return on investment over 90 days.

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

Cambria Global Asset  vs.  iShares Morningstar Multi Asse

Cambria Global Asset

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Global Asset are ranked lower than 8 (%) 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.

iShares Morningstar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Multi Asset are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cambria Global and IShares Morningstar

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

The idea behind Cambria Global Asset and iShares Morningstar Multi 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.