Correlation Between Invesco SP and Cambria Tail

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

By analyzing existing cross correlation between Invesco SP 500 and Cambria Tail Risk, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Cambria Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Cambria Tail.

Diversification Opportunities for Invesco SP and Cambria Tail

-0.54

Correlation Coefficient

Invesco SP  Cambria Tail

Excellent diversification

The 3 months correlation between Invesco and Cambria is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 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 Invesco SP 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 SP 500 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 Invesco SP i.e., Invesco SP and Cambria Tail go up and down completely randomly.

Pair Corralation between Invesco SP and Cambria Tail

Given the investment horizon of 90 days Invesco SP 500 is expected to generate 1.43 times more return on investment than Cambria Tail. However, Invesco SP is 1.43 times more volatile than Cambria Tail Risk. It trades about 0.24 of its potential returns per unit of risk. Cambria Tail Risk is currently generating about -0.05 per unit of risk. If you would invest  3,776  in Invesco SP 500 on September 18, 2024 and sell it today you would earn a total of  100.00  from holding Invesco SP 500 or generate 2.65% return on investment over 90 days.

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

Invesco SP 500  vs.  Cambria Tail Risk

Invesco SP 500

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Invesco SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cambria Tail Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Tail Risk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Invesco SP and Cambria Tail

The main advantage of trading using opposite Invesco SP and Cambria Tail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP 500 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.