Correlation Between Invesco FTSE and Cambria Global

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

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

Diversification Opportunities for Invesco FTSE and Cambria Global

0.89

Correlation Coefficient

Invesco FTSE  Cambria Global

Very poor diversification

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

Pair Corralation between Invesco FTSE and Cambria Global

Considering the 90-day investment horizon Invesco FTSE is expected to generate 2.05 times less return on investment than Cambria Global. But when comparing it to its historical volatility, Invesco FTSE RAFI is 1.04 times less risky than Cambria Global. It trades about 0.02 of its potential returns per unit of risk. Cambria Global Value is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,860  in Cambria Global Value on October 23, 2024 and sell it today you would earn a total of  262.00  from holding Cambria Global Value or generate 14.09% return on investment over 90 days.

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

Invesco FTSE RAFI  vs.  Cambria Global Value

Invesco FTSE RAFI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cambria Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Global Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cambria Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Invesco FTSE and Cambria Global

The main advantage of trading using opposite Invesco FTSE and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE 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 Invesco FTSE RAFI and Cambria Global Value 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.