Correlation Between IShares Russell and Cambria Shareholder

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

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

Diversification Opportunities for IShares Russell and Cambria Shareholder

0.94

Correlation Coefficient

IShares Russell  Cambria Shareholder

Almost no diversification

The 3 months correlation between IShares and Cambria is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and Cambria Shareholder Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Shareholder Yield and IShares Russell 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 Russell Mid Cap are associated (or correlated) with Cambria Shareholder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Shareholder Yield has no effect on the direction of IShares Russell i.e., IShares Russell and Cambria Shareholder go up and down completely randomly.

Pair Corralation between IShares Russell and Cambria Shareholder

Considering the 90-day investment horizon iShares Russell Mid Cap is expected to generate 0.88 times more return on investment than Cambria Shareholder. However, iShares Russell Mid Cap is 1.14 times less risky than Cambria Shareholder. It trades about -0.02 of its potential returns per unit of risk. Cambria Shareholder Yield is currently generating about -0.1 per unit of risk. If you would invest  12,866  in iShares Russell Mid Cap on December 28, 2024 and sell it today you would lose (170.00) from holding iShares Russell Mid Cap or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

iShares Russell Mid Cap  vs.  Cambria Shareholder Yield

iShares Russell Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Russell Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Russell is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cambria Shareholder Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambria Shareholder Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cambria Shareholder is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Russell and Cambria Shareholder

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

The idea behind iShares Russell Mid Cap and Cambria Shareholder Yield 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.