Correlation Between Quadratic Interest and Cambria Tail

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

By analyzing existing cross correlation between Quadratic Interest Rate and Cambria Tail Risk, you can compare the effects of market volatilities on Quadratic Interest and Cambria Tail 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 Quadratic Interest with a short position of Cambria Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quadratic Interest and Cambria Tail.

Diversification Opportunities for Quadratic Interest and Cambria Tail

0.88

Correlation Coefficient

Quadratic Interest  Cambria Tail

Very poor diversification

The 3 months correlation between Quadratic and Cambria is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Interest Rate and Cambria Tail Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Tail Risk and Quadratic Interest 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 Quadratic Interest Rate are associated (or correlated) with Cambria Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Tail Risk has no effect on the direction of Quadratic Interest i.e., Quadratic Interest and Cambria Tail go up and down completely randomly.

Pair Corralation between Quadratic Interest and Cambria Tail

Given the investment horizon of 90 days Quadratic Interest Rate is expected to generate 0.53 times more return on investment than Cambria Tail. However, Quadratic Interest Rate is 1.9 times less risky than Cambria Tail. It trades about 0.2 of its potential returns per unit of risk. Cambria Tail Risk is currently generating about 0.1 per unit of risk. If you would invest  1,756  in Quadratic Interest Rate on December 29, 2024 and sell it today you would earn a total of  114.00  from holding Quadratic Interest Rate or generate 6.49% return on investment over 90 days.

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

Quadratic Interest Rate  vs.  Cambria Tail Risk

Quadratic Interest Rate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quadratic Interest Rate are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Quadratic Interest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cambria Tail Risk

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Tail Risk are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Cambria Tail is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Quadratic Interest and Cambria Tail

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

The idea behind Quadratic Interest Rate and Cambria Tail Risk 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.