Correlation Between Swan Hedged and Cambria Value

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

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

Diversification Opportunities for Swan Hedged and Cambria Value

0.7

Correlation Coefficient

Swan Hedged  Cambria Value

Poor diversification

The 3 months correlation between Swan and Cambria is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Swan Hedged Equity and Cambria Value and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Value and Swan Hedged 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 Swan Hedged Equity are associated (or correlated) with Cambria Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Value has no effect on the direction of Swan Hedged i.e., Swan Hedged and Cambria Value go up and down completely randomly.

Pair Corralation between Swan Hedged and Cambria Value

Given the investment horizon of 90 days Swan Hedged Equity is expected to under-perform the Cambria Value. But the etf apears to be less risky and, when comparing its historical volatility, Swan Hedged Equity is 1.52 times less risky than Cambria Value. The etf trades about -0.09 of its potential returns per unit of risk. The Cambria Value and is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,942  in Cambria Value and on December 28, 2024 and sell it today you would lose (24.00) from holding Cambria Value and or give up 0.82% of portfolio value over 90 days.

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

Swan Hedged Equity  vs.  Cambria Value and

Swan Hedged Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swan Hedged Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Swan Hedged is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cambria Value

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Swan Hedged and Cambria Value

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

The idea behind Swan Hedged Equity and Cambria Value and 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 Transaction History module to view history of all your transactions and understand their impact on performance.