Correlation Between WisdomTree Target and Cambria Global

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

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

Diversification Opportunities for WisdomTree Target and Cambria Global

0.88

Correlation Coefficient

WisdomTree Target  Cambria Global

Very poor diversification

The 3 months correlation between WisdomTree and Cambria is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Target Range and Cambria Global Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Momentum and WisdomTree Target 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 WisdomTree Target Range 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 Momentum has no effect on the direction of WisdomTree Target i.e., WisdomTree Target and Cambria Global go up and down completely randomly.

Pair Corralation between WisdomTree Target and Cambria Global

Considering the 90-day investment horizon WisdomTree Target Range is expected to generate 0.67 times more return on investment than Cambria Global. However, WisdomTree Target Range is 1.48 times less risky than Cambria Global. It trades about 0.21 of its potential returns per unit of risk. Cambria Global Momentum is currently generating about 0.07 per unit of risk. If you would invest  2,434  in WisdomTree Target Range on September 17, 2024 and sell it today you would earn a total of  47.00  from holding WisdomTree Target Range or generate 1.93% return on investment over 90 days.

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

WisdomTree Target Range  vs.  Cambria Global Momentum

WisdomTree Target Range

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Target Range are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, WisdomTree Target is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Cambria Global Momentum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Global Momentum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with WisdomTree Target and Cambria Global

The main advantage of trading using opposite WisdomTree Target and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Target 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 WisdomTree Target Range and Cambria Global Momentum 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.