Correlation Between Cambria Global and Cambria Foreign

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

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

Diversification Opportunities for Cambria Global and Cambria Foreign

0.63

Correlation Coefficient

Cambria Global  Cambria Foreign

Poor diversification

The 3 months correlation between Cambria and Cambria is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Global Momentum 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 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 Momentum 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 Cambria Global i.e., Cambria Global and Cambria Foreign go up and down completely randomly.

Pair Corralation between Cambria Global and Cambria Foreign

Given the investment horizon of 90 days Cambria Global Momentum is expected to under-perform the Cambria Foreign. In addition to that, Cambria Global is 1.07 times more volatile than Cambria Foreign Shareholder. It trades about -0.08 of its total potential returns per unit of risk. Cambria Foreign Shareholder is currently generating about 0.01 per unit of volatility. If you would invest  2,592  in Cambria Foreign Shareholder on December 3, 2024 and sell it today you would earn a total of  3.00  from holding Cambria Foreign Shareholder or generate 0.12% return on investment over 90 days.

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

Cambria Global Momentum  vs.  Cambria Foreign Shareholder

Cambria Global Momentum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambria Global Momentum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cambria Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cambria Foreign Shar

Risk-Adjusted Performance

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 Cambria Global and Cambria Foreign

The main advantage of trading using opposite Cambria Global and Cambria Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Global 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 Cambria Global Momentum 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.