Correlation Between Cambria Global and Managed Portfolio

Can any of the company-specific risk be diversified away by investing in both Cambria Global and Managed Portfolio 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 Managed Portfolio 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 Managed Portfolio Series, you can compare the effects of market volatilities on Cambria Global and Managed Portfolio 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 Managed Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Global and Managed Portfolio.

Diversification Opportunities for Cambria Global and Managed Portfolio

0.93

Correlation Coefficient

Cambria Global  Managed Portfolio

Almost no diversification

The 3 months correlation between Cambria and Managed is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Global Momentum and Managed Portfolio Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Portfolio Series 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 Managed Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Portfolio Series has no effect on the direction of Cambria Global i.e., Cambria Global and Managed Portfolio go up and down completely randomly.

Pair Corralation between Cambria Global and Managed Portfolio

Given the investment horizon of 90 days Cambria Global Momentum is expected to under-perform the Managed Portfolio. In addition to that, Cambria Global is 1.58 times more volatile than Managed Portfolio Series. It trades about -0.02 of its total potential returns per unit of risk. Managed Portfolio Series is currently generating about -0.02 per unit of volatility. If you would invest  3,442  in Managed Portfolio Series on December 29, 2024 and sell it today you would lose (25.00) from holding Managed Portfolio Series or give up 0.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Cambria Global Momentum  vs.  Managed Portfolio Series

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.

Managed Portfolio Series

Risk-Adjusted Performance

Very Weak

Over the last 90 days Managed Portfolio Series has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Managed Portfolio is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cambria Global and Managed Portfolio

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

The idea behind Cambria Global Momentum and Managed Portfolio Series 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.