Correlation Between SPDR SSgA and Cambria Global

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

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

Diversification Opportunities for SPDR SSgA and Cambria Global

0.89

Correlation Coefficient

SPDR SSgA  Cambria Global

Very poor diversification

The 3 months correlation between SPDR and Cambria is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Income and Cambria Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Asset and SPDR SSgA 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 SPDR SSgA Income 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 Asset has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and Cambria Global go up and down completely randomly.

Pair Corralation between SPDR SSgA and Cambria Global

Given the investment horizon of 90 days SPDR SSgA Income is expected to generate 0.66 times more return on investment than Cambria Global. However, SPDR SSgA Income is 1.51 times less risky than Cambria Global. It trades about -0.13 of its potential returns per unit of risk. Cambria Global Asset is currently generating about -0.12 per unit of risk. If you would invest  3,281  in SPDR SSgA Income on September 24, 2024 and sell it today you would lose (98.00) from holding SPDR SSgA Income or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

SPDR SSgA Income  vs.  Cambria Global Asset

SPDR SSgA Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SPDR SSgA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cambria Global Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Global Asset has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cambria Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSgA and Cambria Global

The main advantage of trading using opposite SPDR SSgA and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SSgA 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 SPDR SSgA Income and Cambria Global Asset 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.