Correlation Between IShares Core and Cambria Value

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

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

Diversification Opportunities for IShares Core and Cambria Value

0.27

Correlation Coefficient

IShares Core  Cambria Value

Modest diversification

The 3 months correlation between IShares and Cambria is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Cambria Value and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Value and IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and Cambria Value go up and down completely randomly.

Pair Corralation between IShares Core and Cambria Value

Considering the 90-day investment horizon iShares Core SP is expected to generate 1.11 times more return on investment than Cambria Value. However, IShares Core is 1.11 times more volatile than Cambria Value and. It trades about -0.02 of its potential returns per unit of risk. Cambria Value and is currently generating about -0.22 per unit of risk. If you would invest  60,295  in iShares Core SP on November 28, 2024 and sell it today you would lose (587.00) from holding iShares Core SP or give up 0.97% of portfolio value over 90 days.

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

iShares Core SP  vs.  Cambria Value and

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 latest unfluctuating performance, the Etf's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares Core and Cambria Value

The main advantage of trading using opposite IShares Core and Cambria Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP 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.

Check out your portfolio center.

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.