Correlation Between Cambria Global and Fairlead Tactical

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

By analyzing existing cross correlation between Cambria Global Value and Fairlead Tactical Sector, you can compare the effects of market volatilities on Cambria Global and Fairlead Tactical 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 Fairlead Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Global and Fairlead Tactical.

Diversification Opportunities for Cambria Global and Fairlead Tactical

0.15

Correlation Coefficient

Cambria Global  Fairlead Tactical

Average diversification

The 3 months correlation between Cambria and Fairlead is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Global Value and Fairlead Tactical Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairlead Tactical Sector 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 Value are associated (or correlated) with Fairlead Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairlead Tactical Sector has no effect on the direction of Cambria Global i.e., Cambria Global and Fairlead Tactical go up and down completely randomly.

Pair Corralation between Cambria Global and Fairlead Tactical

Given the investment horizon of 90 days Cambria Global Value is expected to generate 1.0 times more return on investment than Fairlead Tactical. However, Cambria Global Value is 1.0 times less risky than Fairlead Tactical. It trades about -0.18 of its potential returns per unit of risk. Fairlead Tactical Sector is currently generating about -0.23 per unit of risk. If you would invest  2,166  in Cambria Global Value on October 9, 2024 and sell it today you would lose (60.00) from holding Cambria Global Value or give up 2.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Cambria Global Value  vs.  Fairlead Tactical Sector

Cambria Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Global Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cambria Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fairlead Tactical Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairlead Tactical Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Fairlead Tactical is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cambria Global and Fairlead Tactical

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

The idea behind Cambria Global Value and Fairlead Tactical 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.